Benzinga - by Chris Katje, Benzinga Staff Writer.
Fidelity kept its stake in Twitter, now known as X, after billionaire Elon Musk's purchase in 2022.
The firm holds a position in the social media platform via a mutual fund, Fidelity Blue Chip Growth Fund (FBGRX). It previously marked down its valuation several times in 2023 before raising the valuation in mid-2023 for three consecutive months.
What Happened: According to Axios, Fidelity recently increased the value of Twitter — or X Holdings — in the fund, by 11% in the month ending December.
The firm holds the stake at a 68% discount to the original purchase price by Musk. This would imply a valuation of around $14.1 billion from Fidelity.
Along with the value of Twitter being less than the $44 billion buyout price according to Fidelity's valuation, the carrying value is also below where Twitter stock originally traded before Musk began discussing an acquisition, Axios' Dan Primack previously said.
Fidelity does not make public the way they determine the value of private companies held in the fund. Axios notes that the rising value of peer social media companies like Snap Inc (NYSE:SNAP) and Meta Platforms (NASDAQ:META) in December could have been a contributing factor.
Meta and Snap were up 9% and 23% respectively in December. Meta and Snap shares are up 162% and 37% respectively over the last year.
Another possibility for the rising valuation for Twitter from Fidelity could be Musk saying that Twitter shareholders could get a future stake in new AI companies he has created or will create in the future.
Related Link: Musk’s Twitter Could Expand Sports Betting Presence Through Partnership With This Company
Why It's Important: The Fidelity Blue Chip Growth Fund also holds stakes in some of the most well-known private companies like SpaceX, Fanatics, Stripe, Reddit, Epic Games, Redwood Materials and more.
Other investors in Twitter include Baron Funds and Ark Invest. Both firms have also written down their valuations on the asset. This trend could make it harder for Musk to raise capital without discounting the value.
Musk helped fund the Twitter purchase by selling a portion of his shares in Tesla Inc (NASDAQ:TSLA). Some experts said the overhang hurt shares of the electric vehicle company.
Wedbush analyst Dan Ives expects Musk to raise additional capital for X in 2024. Musk’s goal is to transform the platform into a super-app concept. The additional funding could lower the risk of Musk needing to sell Tesla shares.
While Fidelity Blue Chip Growth Fund owns stakes in many privately traded companies, the fund's largest assets are some of the most well-known stocks. The largest holdings in the fund are NVIDIA Corporation, Microsoft Corporation, Apple Inc, Amazon.com Inc, Alphabet Inc and Meta Platforms as of the end of 2023.
The list above shows that six of the "Magnificent 7" stocks are the top six holdings. The other Mag 7 stock, Tesla, comes in as the 13th largest holding in the fund.
Musk touts that the potential value of X will be $250 billion or more in the future. And Fidelity, he says, “will make a great return in the end."
Read Next: Cathie Wood Invested In Musk’s Twitter Takeover, How You Can Get A Stake For $500
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