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This isn’t exactly my wheelhouse, can someone explain what this means in simple terms? In my mind it kind of seems like the value as a public company was (at t

This isn’t exactly my wheelhouse, can someone explain what this means in simple terms? In my mind it kind of seems like the value as a public company was (at time of purchase, at least) $44 billion, but Fidelity’s internal analysts have decided that if it were to be sold today it would go for about half that?

poniko 4y ago
As an investment firm you specify what you current investments are valued at, up or down from time to time. When the company is public its just the stock price but as private it's more of the precived value, that can also differ from one firm to another holding the same paper. So in short they say their investment now is half the value compared to when they put money in. In 6 months they can reevaluate and say the value is xx amout more again.
- braingenious 4y ago
  So this is strictly the value of their investment and not reflective of their assessment of the business as a whole? How exactly does that work? Is it like if I bought a stake in a bag of apples but only my apple went bad?
  - everforward 4y ago
    It's reflective of their assessment of the business as a whole. That number is basically "what we think Twitter as a whole is worth * the percent we own". They think Twitter as a whole is worth half as much, so they're marking down the value of their shares.
    - braingenious 4y ago
      Thank you, that actually makes sense.
maxerickson 4y ago
It doesn't mean anything. Fidelity is required to tell people that have money in the fund what they think the asset is worth, but they own such a small stake that they aren't going to have particularly different information than anyone else.
- MrMan 4y ago
  This comment has negative value because it’s casually dismissive but the author feigns knowledge of the subject matter but in fact misleads the reader. Fidelity employs competent investment analysts. They have determined that twitter is worth less than half it was at the time Musk purchased it. This means Fidelities stake is worth less by the same percentage. None of this has anything to do with the size of Fidelities stake.
  - maxerickson 4y ago
    If the analysts are tasked with getting blood from a turnip it doesn't matter how competent they are. Note that I'm not arguing that Twitter is worth more (or less) than they say it is, I'm arguing that they likely don't have access to information that makes their valuation particularly useful.
    - doubleg72 4y ago
      Ha yeah, one of the largest financial firms doesn't have access to any useful information regarding their investments. This is quite possibly the most ridiculously ignorant comment I have read on HN.
      - braingenious 4y ago
        It’s kind of refreshing to see somebody blatantly carrying water for elmo without outright accusing anyone critical of his business acumen as spreading “FUD”
        maxerickson 4y ago
v0idzer0 4y ago
Theres not much of a story here. The entire sector is down from the FED induced covid highs. For example, Amazon and Facebook are down 50% in the public markets. But since Twitter is now private and has no public stock price, its up to shareholders like Fidelity to guess the current value. This is their guess.
- Arainach 4y ago
  This isn't down from COVID highs, it's down from the purchase price 2 months ago (2022/10/27, long after COVID highs vanished)
  - deepzn 4y ago
    2 months ago, no one in their right mind would buy Twitter at a $44B price. No management would sign off on it. But then it was 20 million out of a 36B fund. Do the math, if it was important in their books. Likely, was just randomly purchased as part of the index, or bought as an insignificant investment.
dragonwriter 4y ago
> In my mind it kind of seems like the value as a public company was (at time of purchase, at least) $44 billion, There was an offer at the price, which the board jumped at and the buyer had immediate remorse and tried to avoid until legally compelled; that rather suggests tbe sale price was a upper rather than lower bound on the actual FMV.
c7b 4y ago
> Fidelity’s internal analysts have decided that if it were to be sold today it would go for about half that Not quite. It depends on which exact accounting method they're using, but the most vanilla version would usually look like this: as long as they belive that Twitter will survive as a company, they will apply 'going concern' valuation [0]. So they try to estimate the value that the company will generate for its owners. Such value could materialize eg in the forms of dividends or share buybacks. Technically, they will try to estimate the company's potential to make such distributions. If they believed that Twitter was eg insolvent, they would apply 'gone concern' valuation, so they would try to estimate for how much each of the company's assets would sell, assuming that the company itself would vanish. Other accounting methods would include eg 'mark-to-market' (for publicly traded assets) or eg 'mark-to-model' (more common for financial instruments without a market price). [0] https://www.investopedia.com/terms/g/goingconcern.asp https://www.investopedia.com/terms/g/goingconcern.asp

poniko 4y ago

As an investment firm you specify what you current investments are valued at, up or down from time to time. When the company is public its just the stock price but as private it's more of the precived value, that can also differ from one firm to another holding the same paper. So in short they say their investment now is half the value compared to when they put money in. In 6 months they can reevaluate and say the value is xx amout more again.

braingenious 4y ago
So this is strictly the value of their investment and not reflective of their assessment of the business as a whole? How exactly does that work? Is it like if I bought a stake in a bag of apples but only my apple went bad?
- everforward 4y ago
  It's reflective of their assessment of the business as a whole. That number is basically "what we think Twitter as a whole is worth * the percent we own". They think Twitter as a whole is worth half as much, so they're marking down the value of their shares.
  - braingenious 4y ago
    Thank you, that actually makes sense.

maxerickson 4y ago

It doesn't mean anything. Fidelity is required to tell people that have money in the fund what they think the asset is worth, but they own such a small stake that they aren't going to have particularly different information than anyone else.

MrMan 4y ago
This comment has negative value because it’s casually dismissive but the author feigns knowledge of the subject matter but in fact misleads the reader. Fidelity employs competent investment analysts. They have determined that twitter is worth less than half it was at the time Musk purchased it. This means Fidelities stake is worth less by the same percentage. None of this has anything to do with the size of Fidelities stake.
- maxerickson 4y ago
  If the analysts are tasked with getting blood from a turnip it doesn't matter how competent they are. Note that I'm not arguing that Twitter is worth more (or less) than they say it is, I'm arguing that they likely don't have access to information that makes their valuation particularly useful.
  - doubleg72 4y ago
    Ha yeah, one of the largest financial firms doesn't have access to any useful information regarding their investments. This is quite possibly the most ridiculously ignorant comment I have read on HN.
    - braingenious 4y ago
      It’s kind of refreshing to see somebody blatantly carrying water for elmo without outright accusing anyone critical of his business acumen as spreading “FUD”
      - maxerickson 4y ago

v0idzer0 4y ago

Theres not much of a story here. The entire sector is down from the FED induced covid highs. For example, Amazon and Facebook are down 50% in the public markets. But since Twitter is now private and has no public stock price, its up to shareholders like Fidelity to guess the current value. This is their guess.

Arainach 4y ago
This isn't down from COVID highs, it's down from the purchase price 2 months ago (2022/10/27, long after COVID highs vanished)
- deepzn 4y ago
  2 months ago, no one in their right mind would buy Twitter at a $44B price. No management would sign off on it. But then it was 20 million out of a 36B fund. Do the math, if it was important in their books. Likely, was just randomly purchased as part of the index, or bought as an insignificant investment.

dragonwriter 4y ago

> In my mind it kind of seems like the value as a public company was (at time of purchase, at least) $44 billion, There was an offer at the price, which the board jumped at and the buyer had immediate remorse and tried to avoid until legally compelled; that rather suggests tbe sale price was a upper rather than lower bound on the actual FMV.

c7b 4y ago

> Fidelity’s internal analysts have decided that if it were to be sold today it would go for about half that Not quite. It depends on which exact accounting method they're using, but the most vanilla version would usually look like this: as long as they belive that Twitter will survive as a company, they will apply 'going concern' valuation [0]. So they try to estimate the value that the company will generate for its owners. Such value could materialize eg in the forms of dividends or share buybacks. Technically, they will try to estimate the company's potential to make such distributions. If they believed that Twitter was eg insolvent, they would apply 'gone concern' valuation, so they would try to estimate for how much each of the company's assets would sell, assuming that the company itself would vanish. Other accounting methods would include eg 'mark-to-market' (for publicly traded assets) or eg 'mark-to-model' (more common for financial instruments without a market price). [0] https://www.investopedia.com/terms/g/goingconcern.asp https://www.investopedia.com/terms/g/goingconcern.asp