X Holdings Eyes Equity Fundraising to Regain $44 Billion Valuation

X Holdings Corp., formerly known as Twitter, is reportedly in talks with investors for a fresh equity fundraising that could restore its valuation to the $44 billion it commanded in 2022.

Improved Financials, Adjusted Accounting Drive Enthusiasm

Despite lingering debt, X's improved financials have buoyed investor sentiment. The company's adjusted financials, which differ from standard accounting norms, show $2.6 billion in total net revenue for 2022, eclipsing Twitter's pre-Musk revenue of $5.1 billion. X also boasts an adjusted profit of $1.4 billion, marking a significant improvement from its pre-acquisition losses.

Debt Burden Remains Elevated

Despite the adjusted improvements, X's debt burden remains substantial, at approximately nine times its adjusted earnings. This exceeds the six times leverage ratio that regulators consider risky.

Advertising Revenue Strengthens

X's advertising revenue has rebounded, with prominent advertisers like Amazon, Apple, Kraft Heinz, and Stellantis returning to the platform. The company also has a stake in xAI Corp., an artificial intelligence venture led by Elon Musk.

Musk Connection Fuels Investor Optimism

Elon Musk's affiliation with former US President Donald Trump has been a catalyst for investor optimism, boosting confidence in X's business prospects. Musk's FOMO (fear of missing out) has outweighed concerns typically raised by credit investors.

Advertisers Return Amid Litigation Threat

Some advertisers have reconsidered their stance on X due to Musk's lawsuits against brands that withdrew their ad spend. The threat of litigation and Musk's influence on Trump have influenced advertisers' decisions to return.

Conclusion

X Holdings is actively seeking equity funding to regain its previous valuation, buoyed by adjusted financials, advertising growth, and the Musk factor. While its debt burden remains elevated, investor optimism prevails, driven by the belief that Musk's unconventional approach and connections will steer the company towards a successful future.