Elon Musk might be crowned the world’s richest person, but according to the Wall Street Journal, he’s earned another, less flattering title: the worst dealmaker in US markets since the Global Financial Crisis.
The Rupert Murdoch-owned paper is slamming Musk’s $44 billion takeover of Twitter, now rebranded as X. Since late 2022, the social media platform’s value has nosedived, making the $13 billion in debt banks took on to finance the deal virtually unsaleable.
The Journal reports these loans have been stuck on the balance sheets of seven original banks despite desperate attempts to offload them at steep discounts. Lenders like Morgan Stanley, Bank of America, and Barclays have been holding onto Musk’s debt for a whopping 22 months – the longest unsold debt financing deal since the Great Financial Crisis, according to PitchBook data.
But the losses don’t end there. Some banks have written down the value of these loans, although the Journal didn’t say which ones. The paper reported, “Twitter loans have been hung longer than every similar unsold deal since the 2008-09 financial crisis for which the research firm has complete records.” While lenders have pocketed interest payments, the value of the loans has been slashed by hundreds of millions of dollars.
Meanwhile, Tesla shares – once valued at a peak of $407 in November 2021 – have almost halved, closing at $221 on Tuesday. This cuts the company’s market value from roughly $1.2 trillion to $692 billion. The shares were around $303 in September 2022, just before the Twitter deal was finalised after a lengthy negotiation process.
While Musk rubs shoulders with the likes of Donald Trump, the bankers who negotiated these loans are feeling the pain. Some M&A bankers copped a 40% pay cut in 2023 compared to the previous year, mainly due to loans stuck on their balance sheets, the biggest of which was Musk’s Twitter takeover.
The Journal estimates the lenders will lose a whopping $2 billion on the deal. Bloomberg adds that X is struggling financially despite Musk’s controversial restructuring and cost-cutting efforts. The company’s revenue plunged 40% in the first half of 2023, according to the latest figures.
