The loan used in Elon Musk’s acquisition of Twitter was the worst merger-lending deal for banks since the 2008-09 financial crisis, according to the report.
The seven banks involved in the deal, including Bank of America and Morgan Stanley, provided about $13 billion to take the social media giant private in 2022.
Typically, banks that lend money to an acquisition try to quickly sell the debt to other investors, but that wasn’t possible in the case of Twitter because the company’s performance has deteriorated since Musk’s acquisition.
As a result, loans remain “stuck” on banks’ balance sheets.
Elon Musk’s Twitter hijack was record-breakingly bad
Lending volumes have declined since the completion of its $44 billion acquisition of Twitter (now renamed X), which The Wall Street Journal reports is now in “historic territory” of underperformance.
Twitter’s loan remains the longest-pending of any similar unsold deal since the 2008-09 financial crisis, according to PitchBook LCD data.
Elon Musk’s Twitter deal is the worst loan since the 2008 financial crisis (Image provided)
Some of the banks involved in the loans have written down their loan amounts by hundreds of millions of dollars.
Despite receiving large amounts of interest on the X loans, the poor performance impacted the banks’ overall performance and contributed to some of them dropping down the investment banking rankings.
The impact on compensation cannot be overlooked
The Twitter loan and other hung deals are also impacting the pay of some bankers: Barclays’ top investment banker in the mergers and acquisitions team was told his pay would be cut by at least 40% from the previous year last year, with Company X being one of the biggest drivers of the decline in performance.
X has faced numerous challenges since Musk’s acquisition, including tensions with advertisers, who make up the majority of its revenue. Earlier this month, the company filed a lawsuit against the Advertising Coalition and some of its members, alleging a conspiracy to boycott the platform has cost the company billions of dollars.
How much money did Elon lose on Twitter?
As of 2024, Elon Musk’s investment in Twitter (now X) has resulted in significant financial losses.
While the exact figure is difficult to determine due to ongoing legal proceedings and fluctuating market conditions, it is estimated that Musk lost billions of dollars on the acquisition.
These losses are due to several factors, including:
Declining advertising revenue: Concerned about content moderation and potential damage to the brand, advertisers have cut back on spending on Twitter. Increasing costs: Musk has implemented significant changes to the platform, including layoffs and new features, which have increased operational costs. Debt obligations: The Twitter acquisition came with a large amount of debt, increasing Musk’s financial burden.
It’s important to keep in mind that the situation is still evolving, and the ultimate financial impact of Musk’s ownership of Twitter may change over time.
Poor Twitter performance is impacting banks’ overall financial performance and rankings (Image credit)
Why are Twitter employees suing Elon Musk?
Twitter employees are suing Elon Musk on several grounds, mainly related to his conduct since acquiring the company in 2022.
The main grounds for the lawsuit are:
Mass layoffs: One of the most significant issues was the mass layoffs that occurred shortly after Musk’s acquisition. Many employees were fired without warning or severance pay, leading to legal disputes. Working conditions: Employees have also complained about worsening working conditions, including longer hours, increased workloads, and a more hostile work environment. Stock options: Some employees have filed lawsuits over the cancellation of stock options that were a key part of their compensation packages. Age discrimination: The layoffs have been subject to allegations of age discrimination, with older employees disproportionately affected. Retaliation: Employees who voiced opposition or complaints about Musk’s policies claim they have been retaliated against, including demotions, termination, and other adverse action.
The lawsuits reflect the big changes and challenges Twitter employees have faced under Musk’s leadership.
All of these ongoing issues have combined to exacerbate Twitter’s poor performance under Musk’s ownership.
Featured image credit: Ravi Sharma/Unsplash