In a tale reminiscent of financial upheaval, Elon Musk’s audacious buyout of Twitter, now known as X, has plunged into murky waters, unveiling itself as the most disastrous merger-finance deal for banks since the turbulent times of 2008-09. According to a recent report, seven prominent banks, including titans like Bank of America and Morgan Stanley, funneled a staggering $13 billion into Musk’s venture to privatize the social media behemoth.
However, what began as a bold gamble has turned into a financial quagmire. Traditionally, banks involved in buyouts swiftly offload the loans to eager investors, but in this case, they find themselves ensnared, unable to pass on the debt without incurring catastrophic losses. The Wall Street Journal paints a bleak picture, noting that the poor financial health of the company has left these loans languishing on the books of the banks as liabilities that refuse to budge.
As Musk’s grand $44 billion takeover finalized, the value of these loans plummeted, signaling deep-seated trouble ahead. The deal now stands in the annals of history, marking a low point for its lackluster performance—worrisome news for the banks, as PitchBook LCD data reveals these Twitter loans have been abandoned longer than any comparable unsold deals since the last financial crisis.
Although these lenders have managed to claim hefty interest payments on the loans, the banks have inevitably adjusted the value of these loans downward by hundreds of millions, a painful pill to swallow. As autumn painted a grim landscape, X’s estimated worth dwindled to approximately $19 billion, a staggering 55 percent decline from Musk’s initial acquisition price—a testament to the tumultuous journey since that fateful moment.
Under Musk’s stewardship, the platform’s relationship with advertisers, the lifeblood of its revenue, has been tempestuous. Notably, Musk’s abrasive dismissals of those who paused their spending on the platform sparked outrage, while legal battles brewed, alleging a coordinated boycott that bled billions from the company’s coffers.
The ramifications of this deal ripple through the financial fabric, pulling down some banks in the investment banking hierarchy, as previous areas of prosperity appear clouded by this storm. Sources reveal discontent among the ranks, where top bankers at Barclays’ mergers and acquisitions team faced a staggering 40 percent pay cut, an acknowledgement of the disastrous impact of multiple hung deals on their overall performance—none more so than the behemoth that is X.
