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In October 2022, Elon Musk finalized the acquisition of Twitter, renamed X, for the colossal sum of $44 billion. To finance this operation, Musk borrowed $13 billion from seven major banks, including BNP Paribas, Morgan Stanley, and Bank of America. However, nearly two years after this acquisition, these financial institutions deeply regret their decision.
A disastrous financing operation for the banks
This financing deal is considered one of the worst since the financial crisis of 2008-2009. The banks hoped to quickly resell this debt, but X’s financial situation deteriorated. The platform’s value plummeted, and the banks had to resell the debts at a loss. Moreover, Musk’s ambitious crypto project for X did not suffice to turn the situation around.
This mishap forced the banks to keep these loans on their books, which heavily weighs on their financial health. In finance, these are called “hung deals,” and they are among the longest since the 2008-2009 crisis. The banks must now hope that Musk can turn X’s situation around to limit the losses.
The advertiser exodus
Another aggravating factor is the exodus of advertisers from the platform. Major companies like Coca-Cola and Apple have stopped running ads on X due to the controversies surrounding Musk’s management. Musk’s denunciations of the EU’s secret censorship, massive layoffs, the rise of misinformation, and the return of problematic personalities have contributed to this situation. Until its buyout, ads made up the bulk of the platform’s revenue, and their loss has had a significant impact on X’s finances.
The buyout of Twitter by Elon Musk, financed by massive bank loans, has proven disastrous for the involved banks. The financial deterioration of X and the advertiser exodus rendered the debt resale impossible, leading to substantial losses for the banks. Moreover, Musk refused to integrate crypto into the platform, exacerbating the situation. This highlights the risks of major financing operations and the need for caution by financial institutions.
