Fact Check: Elon Musk Didn't Buy YouTube

Mohit Oberoi, CFA - Author
By

May 6 2022, Published 8:15 a.m. ET

Tesla CEO Elon Musk is always in the headlines. The world’s richest person is acquiring Twitter and will take it private. Over the last few months, there have been rumors about Musk buying the luxury car company Mercedes Benz. Now, many are speculating that Musk has bought YouTube as well. Did Musk buy YouTube?

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Musk’s business empire is quite large. Apart from Tesla, which accounts for the bulk of his wealth, Musk owns several companies including SpaceX, Neuralink, and The Boring Company. Some believe that an eventual listing of SpaceX would lead to a bump in Musk's net worth. He is anyways the world’s richest person and in 2021 he became the first person ever to have a net worth above $300 billion.

Did Elon Musk buy YouTube?

To clear up the rumors, Musk hasn't bought YouTube. In all likelihood, he wouldn't be able to buy the company ever. Plenty of rumors about Musk are floating around on social media. There has been a rumor that he will ban Bill Gates from Twitter.

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Who owns YouTube?

YouTube is owned by Google-parent Alphabet. The company bought YouTube in 2006 for what then looked like a rich sum of $1.65 billion. However, 16 years later, the acquisition paid off well. While YouTube’s financial results in the first quarter of 2022 were somewhat disappointing, the business has been doing well.

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How much is YouTube worth?

In 2018, Morgan Stanley valued YouTube at $160 billion which was almost 100x what Google had paid for the company. Incidentally, Alphabet stock has itself soared between 2018 and 2022, and despite the recent sell-off, the stock is way above what it was in 2018. Alphabet was the best-performing FAANG stock of 2021 and its market cap surpassed $2 trillion.

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Despite the recent crash, Alphabet has a market cap of $1.54 trillion. Only Apple and Microsoft have a bigger market cap. While we don’t have credible reports on YouTube’s current valuation, it should be higher than the $160 billion that Morgan Stanley calculated in 2018.

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Could Elon Musk buy YouTube?

Unlike Twitter, which is a publicly-traded company, YouTube is owned by Alphabet. Musk can't directly buy YouTube as he did with Twitter. In order for Musk to buy YouTube, Alphabet has to sell the business, which looks unlikely. If Musk wanted to buy YouTube, he would have to buy Alphabet, which again looks unlikely since the company is worth over five times Musk’s net worth.

Another way Musk could buy YouTube is if Alphabet spins off the business for “value unlocking.” In that case, Musk could place a bid, just like he did for Twitter. Even this scenario doesn't look realistic.

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YouTube is facing competition.

The streaming industry is witnessing a severe growth slowdown, which was evident in Netflix’s earnings for the first quarter of 2022. The streaming giant lost 200,000 subscribers in the quarter. Netflix has forecast that it will lose another 2 million subscribers in the current quarter.

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YouTube also faced the heat and its first-quarter revenues of $6.87 billion were below the $7.51 billion that analysts were expecting. The company has been facing competition from TikTok as well.

YouTube has taken several steps to revive its growth and improve its profitability. The company is monetizing the service and has also come up with “Shorts,” which will help it compete better with TikTok.

As for Musk buying YouTube, the news is fake and in all probabilities, he isn't buying the company, at least not in the foreseeable future.

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