When companies and individuals have money, lots of money they have the ability to do something with it. Sometimes it is invested into companies which lose money or value, but the owner believed in the existing value was a bargain. Business is like that, there are typically very good reasons why some businesses are not worth over the long term what they are going for. Fortunately, we live in a country where people are free to spend their money the way they want to.
In an article by Kate Conger and Ryan Mac of the New York Times News Service, Elon Musk says Twitter is now worth $20 billion, down from the $44 billion he paid in October. Although Mr. Musk is one of the wealthiest people in the world, he paid a combination of cash and bonds or debt. In his email Mr. Musk said at one point, the company was 4 months from running out of money. The mass layoffs and cost cutting was necessary to avoid bankruptcy and streamline operations.
In addition, Twitter lost money because advertisers moved their advertising dollars to other platforms in the social media world. Twitter compares well with Snap. The market capitalization of Snap is $18 billion with 375 million daily users, while Twitter is $20 billion and has 237.8 million daily users.
Linking to dividend paying stocks, all companies which are profitable buy and sell companies or involved in mergers and acquisitions to add to the company’s ability to service its customers. Not all mergers work out, some lose money for example in the world of tech, people switched from potential revenues to valuing actual revenues. In the above case Mr. Musk believes or says Twitter could be worth $250 billion, he sees value that no one else does. In public companies, the value has to be seen by shareholders from all their perspectives which is why selling short is seen as not believing the potential for the next year. For you investments, when the company does a takeover or merger do you see the value?
There are more questions than answers, till the next time – to raising questions.