In a tale woven with ambition and caution, Elon Musk’s audacious acquisition of Twitter has spiraled into the worst financing misstep for banks since the echoing aftermath of the 2008 financial crash. At the center of this drama lies a staggering $13 billion in loans, now marooned on the balance sheets of the very banks that once eyed the deal with gleaming optimism, according to a revealing report from The Wall Street Journal.
This financing conundrum starkly contrasts with the norm; typically, banks are nimble, swiftly unloading their loans to keep their books pristine, collecting fees as they go. However, these seven lenders—counting major players like Morgan Stanley, Bank of America, and Barclays—have found themselves in an unusual predicament, clinging to Musk’s problematic loans for a relentless 22 months. This duration marks the longest debt financing deal in limbo since the turbulent tides of the Great Financial Crisis, as detailed by data firm PitchBook LCD.
Once dazzled by Musk’s status as one of the world’s richest, banks were seduced by the potential windfall of financing this high-profile deal. Yet, behind the glossy facade lies a stark reality—a burden that has weighed heavily on their financial shoulders. As reports suggest, many banks have had to significantly write down the value of these loans since the ill-fated takeover completed at the close of 2022.
This unfolding saga isn’t without its consequences; the financial weight of Musk’s debt has curtailed lenders’ capacity to entertain new mergers and acquisitions. It’s been a blow to compensation as well, with some M&A bankers witnessing up to a 40% dip in their earnings in 2023, all rippling out from the quagmire of loans left to stagnate.
Yet, not all is lost. The mountain of debt, though staunchly stuck, does produce a steady stream of interest payments that has lined the pockets of the lenders, albeit modestly. And while there remains a flicker of hope that banks might recoup their investments should Musk’s Twitter—now branded as ‘X’—find its way back to profitability, expectations loom dark on the horizon. Industry insiders suggest that the lenders may face losses nearing $2 billion as the company grapples with a staggering revenue decline of 40% year-on-year during the first half of 2023.
Thus, the saga of Musk’s Twitter takeover continues, a gripping narrative where ambition meets reality, leaving banks, bankers, and the curious onlookers rapt in the unfolding financial drama.
