If the numbers are accurate, what a wild ride it was.

Elon Musk purchased X for $44 billion. This is a point that is known and public. In October (2024), Fidelity valued the company at 80% less, putting it under $10 billion. This made Musk a laughingstock as the media jumped all over the story.

Now, instead of analysts, investors placed the valuation of the company back to the original $44 billion.

X Back To Purchase Price: Valued At $44 Billion

The company is entering another funding round. It will use the proceeds to pay down some of the debt. Basically, from a company perspective, the result is a debt to equity swap. Retire some of the debt by providing equity stake to those who fund the transaction.

Companies that embark on these types of private funding deals have to come up with valuations. This is also done by investors, who go through the numbers to determine what things are worth. It is no different than what analysts at Wall Street firms do. The one area where the overlap ends is these firms are putting up hundreds of millions of dollars. They have a stake in what their analysts decide.

According to The Financial Times, investors are now exchanging stakes in the company at increased value in a secondary deal as the world’s richest man looks to raise additional capital to pay off some of the debt he financed to buy X. The Times reported that in a primary round, Musk aims to bring in $2 billion through selling equity in the company, which will be used to offset a billion dollars in junior debt.

For a move that many viewed as foolish, it does appear that 2.5 years later, in spite of the rocky road, X is holding strong.

What is interesting in the companies that are investing. It is some of the major players in private funding/venture capital deals.

“The new $44bn valuation represents a rebound for Musk and the group’s investors, including Andreessen Horowitz, Sequoia Capital, 8VC, Goanna Capital and Fidelity Investments. The deal would help set a price for the upcoming primary round,” the Financial Times noted.

I would like to highlight the last name listed. Fidelity Investments is now in agreement on the $44 billion valuation. But wait, didn't that company place the value at under $10 billion less than 6 months ago? How could the value do a 4x in such a short period of time?

It is likely there are two different divisions doing the analysis. On the first, it was some analyst who released a sensationalized valuation to get attention. Perhaps that was an orchestrated move by the division (or firm) with the intent on manipulating something.

Now that it is time to get a larger stake, the true analysis comes out.

Turnaround In The Numbers

Ultimately, valuations comes down to the numbers. What money is being generated and how much is going out? The public, since X is a private company, cannot see the numbers. We do get some leaks from those who have access since they are involved financially with the company.

Reports are that advertising has returned to its 2022 level, of around $1.2 billion. This is a move up after an initial drop.

Musk also fired 3/4 of the employees not long after he took over the company. Here is where the true impact is felt, profitability. A flatlining in earnings is beneficial if that is generated with a smaller payroll.

This appears to be what Musk did.

There is, however, a bigger fish that is part of this equation. It is something that we regularly discuss and is the basis for the future.

Growth in the valuation was also likely due to Musk sweetening the pot by giving a 25 percent stake in his artificial intelligence startup xAI to investors in X last year. Since then, the AI company has improved in value to $45 billion, adding additional security to investors in the social media site.

xAI is rapidly moving towards a valuation of over $100 billion. In February, $10 billion was raised at $75 billion. With the release of Grok3 we could see that jump higher. Not only is it integrated into X but there are plans to have it placed in every Tesla.

Simple math leads us to X having $25 billion in xAI holdings at $100 billion. If this is the case, more than half the company's (X) value will come from AI.

This is in alignment with my view that social media is not a destination but, rather, a pathway. Instead, it is AI that these companies are truly offering. Social media is nothing more than a feeder platform of data.

The market appears to be starting to value things as such. I expect this to occur with Google and Meta. At some point, Gemini will be worth more than YouTube.

Web 3.0 is going to have to get onboard with this. Here is where a major transition is taking place. Building a social media network is insufficient. Alternative platforms, even in Web 2.0, such as Rumble, need to make the switch. If not, their momentum will be stalled.

Posted Using INLEO