Will I get my money back? Don’t expect it.
Major Obstacles
Elon Musk’s takeover of Twitter has gone so badly that it’s the worst bank merger financing deal since the 2008-09 financial crisis, The Wall Street Journal reports.
Typically, banks that lend money to a takeover try to quickly sell the debt to other investors and get it off their balance sheets.
But things haven’t worked out so well for Morgan Stanley, Bank of America, Barclays and four other major banks that lent a combined $13 billion to Musk’s October 2022 acquisition of Twitter, now renamed X.
That’s because Twitter’s financial situation was so bad that it couldn’t find anyone to buy its debt, leaving it with one of the worst “hung” loans in history (i.e. loans that cannot be liquidated).
Using data from PitchbookLCD, the Journal found that the loan Musk received to buy Twitter “has been stuck on the books longer than any similar unsold deal since the 2008-09 financial crisis for which the research firm has complete records” — evidence of just how uniquely bad the billionaire’s management of Twitter has been.
Mask Master Class
Since Mr. Musk took over the social media site, Twitter’s value has fallen by nearly three-quarters to about $12.5 billion from the $44 billion he originally paid for it, some of which may be due to Mr. Musk’s actions on the platform and changes he made to many of the site’s features that allegedly alienated users.
But his rule also led to an exodus of advertisers whose ad slots were a key source of revenue for the website, which had been struggling to turn a profit even before the change of ownership.
After these advertisers began leaving en masse, Musk told them to “fuck off,” and he is now suing the group of advertisers who complied, alleging they orchestrated an illegal boycott of the site.
The color of money
Such impulsive decision-making has been of little comfort to the banks, which have been saddled with huge debts for nearly two years and are affecting their ability to lend for other mergers.
Although banks are still receiving interest payments on the loans, some are so eager to get rid of them that they have written down the prices of their loans by hundreds of millions of dollars, according to the WSJ.
The disastrous deal also dealt a blow to the bank’s standing on the world stage: The report noted that both Bank of America and Morgan Stanley lost the top two spots in the banking rankings to JPMorgan and Goldman Sachs, but the firms did not lend Musk money to buy Twitter.
Financial executives are also being personally affected by the deal — Barclays’ top investment bankers were told last year that their salaries would be cut by at least 40 percent from the previous year — and we want to take out the very small violin for them, because even before the Twitter deal was done, it was clear that this was going to be a reckless gamble.
More on Twitter: Elon Musk may have to sell Tesla shares to prop up a declining Twitter