Elon Musk, the billionaire founder and CEO of Tesla Inc., recently sent out an internal memo that reportedly slashed Twitter’s valuation by almost half. According to reports, the memo was sent to employees of Tesla late last week and suggested that the company’s stock was now worth just $10 billion, sharply down from its current market capitalization of nearly $19 billion.
The memo, which was reported by the Wall Street Journal, was sent months after Tesla purchased $1.5 billion worth of its own stock. Musk wrote in the memo that the move was done to improve the company’s balance sheet and make it more competitive when negotiating with suppliers and customers.
The news of Musk’s reported investment in Tesla’s stock could potentially cause Twitter’s shares to drop. It follows a string of troubling news for the social media giant: Twitter has seen a decline in its daily active user numbers, is facing pressure from the government to more heavily regulate its platform, and is dealing with mounting criticism over its handling of misinformation.
Despite all of this, the stock has held relatively steady, buoyed by the expectation that it could benefit from the upcoming U.S. election cycle, with increased ad dollars and more engagement from potential voters.
Musk’s reported decision to slash Twitter’s value in his memo could potentially put a damper on that expectation. The company’s stock dropped more than 2% in after-hours trading after the WSJ’s report, amidst fears that it could be facing even more difficult times ahead.
It remains to be seen how the move will affect Tesla and Twitter in the long run. But the news of Musk’s reportedly cutting the social media giant’s market value nearly in half serves as an important reminder to investors that the company is still facing challenges, and that their investment may not pay off like they hope.