It’s no secret that Jalopnik isn’t the biggest fan of Elon Musk. Sure, he built the most important car of the 21st century, and SpaceX is doing great things without destroying the environment, but he’s also a bigot. And our staff is a bunch of radical leftists who believe in crazy things like “transgender rights are human rights” and “billionaires should pay more taxes.” Other, more conservative media have been much friendlier to Musk, so imagine our surprise when The Wall Street Journal declared his acquisition of Twitter “the worst banking acquisition since the financial crisis.”
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To raise the $44 billion needed to buy Twitter, Musk had to borrow a total of $13 billion from seven banks. Typically, when a bank lends money for an acquisition like this, the debt is quickly sold off. Unfortunately for Morgan Stanley, Bank of America, and the other banks that helped fund the acquisition, that quickly proved not to be an option unless they took huge losses on the loans. As a result, these loans became very expensive headaches for the banks involved, and are now said to be “hung.”
We already knew Twitter’s financials were terrible: Upon taking over, Musk purposefully turned the once-popular social media site into a Nazi playground, alienating both users and advertisers. Then Musk told advertisers to “fuck you” and sued them when they didn’t flock to Twitter sooner. But digging a little deeper, it seems the deal was historically terrible — which means it was objectively the worst deal since the financial crisis.
Banks have kept Twitter’s loan on their books longer than any recent uncollected deal, according to new data from PitchBook LCD. Banks had much more uncollected debt in 2008 and 2009, but were generally able to get it off their books within a year. Musk’s debt, meanwhile, remains uncollected nearly two years later. Steven Kaplan, a finance professor at the University of Chicago, told the WSJ that not only is this the largest uncollected debt since the financial crisis, it’s one of the largest uncollected debts he’s ever seen.
So how did the banks get into this situation? Believe it or not, it reportedly came down to old-fashioned greed. Musk is rich, and the banks saw dollar signs when he asked for funds. The Twitter deal may have been a bad one, but if the banks had gotten in earlier, they might have had a shot at more lucrative deals down the line, like the SpaceX IPO.
And there’s always the chance that the Twitter deal itself will be a good investment. Things may look bad now, but Musk is continuing to make interest payments. And in the extremely unlikely event that Musk manages to turn things around in an online conspiracy forum, there’s always the chance he could actually get his money back, too. “You could lose money selling at some price, but Musk might get 100 cents on the dollar if it works out,” Kaplan told the Journal.
Will that happen? There are plenty of possibilities, but at this point there’s little evidence that it will. The bureau’s revenues are falling, annual interest payments have cost the biosite Pussy in Bio at least $1.5 billion, and Musk continues to look increasingly shaky while cozying up to people who seem to know the age of consent in all 50 states by heart. Will the bankers who put this deal together learn their lesson? Probably not. But we can take some solace in the tears shed when bonuses were cut.