Investors Are Overvaluing Musk’s X

Wow. Elon Musk really is the Pied Piper of investors. Bloomberg reported on Wednesday that the social media firm had raised “close to $1 billion” in fresh equity at a $32 billion valuation. Including X’s debt, that implies a roughly $44 billion enterprise value for the company, which is what it was worth in Musk’s 2022 buyout of the company then called Twitter. Given that X’s revenue last year was reportedly $2.7 billion, nearly half what it was in 2021 (the last full year before the buyout), the new valuation seems a little rich.

Consider this: Investors in the fundraising are valuing X at 16 times 2024 revenue, or twice the average multiple at which publicly traded social media firms—Reddit, Snap, Pinterest and Meta Platforms—are trading, according to Koyfin data. If X was valued in line with those stocks, its enterprise value would be $21.6 billion—and after taking into account its $13 billion or so of debt, its equity would be worth just $9 billion. So how has Musk persuaded investors X is worth so much more than its (better-performing) peers?