Over the weekend, Twitter owner and CEO Elon Musk said the platform will launch an ad-free subscription tier. This news comes as the social media platform’s value and the CEO’s fortune continue to plummet.
Forbes now estimates Musk’s net worth at $156 billion. Bloomberg estimates it at $139 billion. This is $40 billion to 50 billion less than the fortune of Bernard Arnault, who heads French luxury conglomerate LVMH (OTCMKTS:LVMUY). Before the Twitter sale closed, Elon Musk was well ahead of Arnault.
Tesla (NASDAQ:TSLA), the electric vehicle (EV) company at the heart of Musk’s fortune, is down nearly 40% since the acquisition. Its market capitalization now rests at around $440 billion. Twitter’s ad revenue is also down 40%, according to The Information.
Twitter and Elon Musk
Elon Musk’s reign over of Twitter is impacting more than just his fortune.
Twitter, which Musk bought for $44 billion, is worth many times more than the media companies that feed it stories. For example, The New York Times Company (NYSE:NYT) is worth just $5.6 billion as of this writing. Paramount Global (NASDAQ:PARA), which owns CBS News, is worth just $13.7 billion as well. News distribution is in crisis and the journalism industry is facing record layoffs.
Some users are fleeing Twitter, claiming it has become unusable except as a misinformation platform. Some are going to startups, others to open source Mastodon, which has seen a spike in traffic.
Advertisers are facing hard choices on where to spend and are generally cutting back. But shares in the top online ad platforms, Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) and Meta Platforms (NASDAQ:META), are holding up. Meta is up 7% since the Twitter sale closed.
Musk has tried to cut costs by firing people, refusing to pay severance and not paying bills, including those for janitors. It’s not a good look. Musk also took on $13 billion in debt for the purchase, with $300 million reportedly due “as soon as this week.” This could also put further pressure on TSLA stock.
What Happens Next?
Twitter is hard to replace, but it can be done. In December, Musk said he was actively seeking a new Twitter CEO. But that won’t solve anything unless that person is given autonomy — and that seems unlikely. For now, investors and Twitter users will just have to live with the uncertainty.
On the date of publication, Dana Blankenhorn held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.