Everyone knew Elon Musk overpaid for Twitter when he bought the social media platform in 2022. That’s why the billionaire tried to get a court order to back out of the deal before it could be finalized. But now, according to a report from The Wall Street Journal on Tuesday, we have more information about just how financially foolish the Twitter purchase was. Apparently, it was the worst deal since the 2008 global financial crisis.
According to the Wall Street Journal, seven banks lent a combined $13 billion to Elon Musk in 2022 to help him acquire Twitter (now known by the uncomfortably generic name X), but none of the banks were able to repay the debt without taking “significant losses” on the deal, meaning the loans just sit on these banks’ balance sheets. In fact, the Journal explains that this is not just one of the worst deals since 2008, but one of the worst of all time.
Musk and other investors brought in about $30 billion in cash, and the banks provided the remaining $13 billion to complete the acquisition. But we now know that the people working at the bank suffered considerable financial pain for agreeing to such a foolish thing. How much pain? According to The Wall Street Journal, Barclays’ top investment bankers were told at a dinner in late 2023 that everyone’s salaries would be cut by at least 40%. After everyone received their bonuses for the year, about 50 of the company’s 200 directors quit, according to The Wall Street Journal.
All the banks involved in the deal, including Morgan Stanley, Bank of America, Barclays, Mitsubishi UFJ Financial Group, BNP Paribas, Mizuho, and Société Générale, are struggling with this on their books. And talks to restructure the deal have not been fruitful, according to The Wall Street Journal. As countless journalists, including Bloomberg, have previously pointed out, these banks want access to anything Musk plans in the future, including an IPO for SpaceX, arguably the smartest business the billionaire has ever created. SpaceX is a commercial space giant that makes a ton of money from government contracts. SpaceX’s satellite internet division, Starlink, could be spun off and IPO’d in the future. And the hype around all of this puts these banks in a tough position as Musk continues to damage their financials with his foolish Twitter acquisition.
X is currently valued at roughly $19 billion, less than half what Musk paid for it. And yet Musk has earned a reputation for being a genius from some foolish people. The tech billionaire is surrounded by a group of sycophants on X who constantly tell him how amazing he is. This whole incident seems to prove the main reason Musk bought the site: he now has a safe place where everyone is constantly telling him what a genius he is. And for one of the richest men in the world, that’s a lot of value.