Topline
Cathie Wood’s Ark Invest has considerably slashed its valuation for Twitter, Wood told the Wall Street Journal in an interview published Monday, a somewhat surprising revelation given Wood’s long history of faith in Twitter’s billionaire owner Elon Musk, though Wood remains bullish on the social media company for a fairly unexpected reason.
Cathie Wood sees brighter days ahead for Twitter.
Key Facts
Ark has discounted its valuation for Twitter by 47% since Musk officially took the company private in October at a $44 billion enterprise value, according to Wood.
That means Ark now values Twitter at roughly $25 billion, still richer than Fidelity’s $15 billion assessment of the firm as advertising revenues continue to slip.
Wood told the Journal she’d “love” to buy more equity in Twitter but can’t find a seller, a fact which she proclaims “tells you something” about Twitter’s prospects.
Wood pointed to increased competition from Meta as a possible tailwind for Twitter, explaining she believes Twitter and Meta’s upstart rival Threads “can coexist” and the new text app “lit the competitive fire” at Twitter.
The St. Petersburg-based stock-picker also says she believes Musk and his Twitter underlings are “very serious” about turning X into an “everything app;” Musk has previously expressed his dream to transform his slumping social media company into the “biggest financial institution in the world.”
Key Background
Ark, which owned roughly 1.1 million shares of Twitter across its various ETFs before Musk disclosed his stake and purchase agreement in the company, still owns an undisclosed stake in the company in its venture capital fund. Wood rose to prominence in recent years for her oversight of a near 700% return between 2014 and 2021 for Ark’s flagship Innovation ETF, largely driven by the fund’s early investment in Tesla and well-timed investments in pandemic darlings like Zoom. Wedbush analyst Dan Ives, who also shot to fame for his early Tesla bullishness, declared at the time of Musk’s purchase of Twitter the deal was a complete “head scratcher” and “one of the most overpaid tech acquisitions in history.” Ark’s Innovation ETF is down nearly 60% over the last two years, significantly underperforming compared to major stock indexes. Twitter still has a “heavy debt load” and has experienced a roughly 50% decline in ad revenue, Musk tweeted Saturday.
Crucial Quote
Musk is a “renaissance man” and the” inventor of our age,” Wood gushed at an Axios event in May, adding she was “excited” by his vision for Twitter.
Tangent
Meta stock is up nearly 6% since the July 5 launch of Threads, which came as a growing number of users criticized changes to Twitter under Musk’s thumb. Several analysts expect the Facebook parent to add a few billion dollars in incremental revenue in coming years thanks to its Twitter dupe.
Further Reading
Musk Says Twitter Ads Plummet As Battle With Threads Heats Up (Forbes)
Fidelity Values Twitter At Roughly $15 Billion—A Third Of The Sticker Price Paid By Musk (Forbes)
Meta Stock Surge Adds $60 Billion After Threads Launch—And One Analyst Predicts Potential $1 Trillion Valuation (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2023/07/17/investor-cathie-wood-says-threads-will-light-fire-under-musk-and-twitter-but-cuts-valuation-for-company-by-nearly-50/