wsj.com
www.wsj.com

Nearly two years after Elon Musk’s acquisition, X’s business is still struggling to climb out of the deep hole it fell into under his ownership.

The $13 billion that Elon Musk borrowed to buy Twitter has turned into the worst merger-finance deal for banks since the 2008-09 financial crisis.

The seven banks involved in the deal, including Morgan Stanley and Bank of America, lent the money to the billionaire’s holding company to take the social-media platform, now named X, private in October 2022. Banks that provide loans for takeovers generally sell the debt quickly to other investors to get it off their balance sheets, making money on fees.

  • Zaktor@sopuli.xyzEnglish
    165·
    23 days ago

    The losses on banks’ balance sheets from the deal are also biting into potential bonuses for some bankers, the report said.

    They should just be fired. This wasn’t a deal that looked like it had good potential but didn’t pan out. It was obviously a bad buy right from the start and the guy who was going to run the private enterprise was both spread too thin to run it well, was increasingly erratic in his behavior, and wasn’t any good at the business he was taking over. Everyone knew it was a bad deal at the time.

    • Pelicanen@sopuli.xyz
      29·
      23 days ago

      Yes, but have you considered: Tesla line go up. Elon CEO. When Elon CEO, Twitter line go up. Logic.

    • wia@lemmy.ca
      2·
      22 days ago

      You sweet summer child… You think this will affect anyone at the top? All the rich people will walk away unaffected as more layoffs roll down or they borrow from the gov/tax payers.

  • Optional@lemmy.world
    126·
    23 days ago

    At the time, Musk himself had complained that the price for Twitter was too high, but he decided to go ahead with the deal after waffling over it for a while.

    Mmmmmmmmm that’s not how I’d describe it, Marketwatch.

    • bradorsomething@ttrpg.network
      521·
      23 days ago

      I mean, he did have to decide if he wanted to pay the money and take the company, or just pay the money, as he’d signed a solid agreement. So there was a choice.

      • Voroxpete@sh.itjust.works
        35·
        23 days ago

        In retrospect, paying the money and not taking the company might actually have been the more sound financial decision.

    • hamFoilHat@lemmy.world
      4·
      22 days ago

      Guess they didn’t want to say that Musk shit posted so hard that he ended up being forced to buy the company.

  • Mayor Poopington@lemmy.worldEnglish
    106·
    23 days ago

    Guess the saying is true, if you owe the bank $1000, that’s your problem. If you owe the bank $13 billion, its the bank’s problem.

  • some_guy@lemmy.sdf.org
    681·
    23 days ago

    Bank of America and Morgan Stanley commanded the top two spots in the U.S. leveraged-finance investment banking league tables in 2021 and 2022 during some quarters before Musk bought Twitter, according to data from Dealogic. In 2023 and 2024, JPMorgan and Goldman Sachs—which didn’t finance the Twitter deal—have held the top spots.

    He’s so toxic that being involved with him can unseat you from being the top two in your industry. This will make people a bit more hesitant to get into bed with him (gross) in the future.

    Barclays’s top investment bankers on the mergers and acquisitions team were told at a New York dinner early last year that compensation for everyone in the room would be cut by at least 40% from the prior year. The bank had several hung deals hurting its performance but X was by far the largest, according to people familiar with the situation.

    When you’re slashing compensation for your people, especially the ones who bring in real money, you know it’s serious. I’m happy to see X crash and burn and pull down bankers with it. Dumbass mf.

  • WoahWoah@lemmy.world
    421·
    22 days ago

    Isn’t the difference here that Musk has a tremendous amount of assets in the form of Tesla stock that can be used to repay the debt? It’s not like he can declare bankruptcy and stiff them on the bill.

    • Stopthatgirl7@lemmy.worldOP
      314·
      22 days ago

      The thing is, selling off the amount of Tesla stock that he’d need to to pay off the debt would cause Tesla stock to plummet, leaving him significantly less wealthy and putting Tesla in danger. So even though he technically has the money to pay them, he functionally doesn’t.

      • WoahWoah@lemmy.world
        39·
        22 days ago

        He both technically and functionally does have the ability to repay them, which he will find out soon if he doesn’t restructure the debt, and implying this is in anyway similar to the financial crisis is absurd clickbait.

        It could possibly tank Tesla and make Elon less rich if he had to pay his debt. Oh no. As if Tesla being valued at more than 9 major other automakers combined isn’t outlandish in the first place.

        But won’t someone please think of the oligarch and his shareholders! 🙄

        • Laser@feddit.org
          2·
          22 days ago

          and implying this is in anyway similar to the financial crisis is absurd clickbait.

          I think it’s similar in the fact that banks once again gave credit where the securities are massively overvalued; and I’m not sure there are enough investors around to pay that much money for shares. What are bag holders gonna do when the price goes down because a lot of shares are selling?

          Anyhow, this assumes a sane market, which hasn’t been the case for Tesla for 5 years.

      • nondescripthandle@lemmy.dbzer0.com
        141·
        22 days ago

        No debt holder is obliged to consider the reprecussions of collecting their debt, just look at house foreclosure. The wellbeing of a thrid party company has no bearing on the ability to pay back a debt, and there are stock sell off plans that facilitate large liquidation over a period of time to ameliorate the stock price drop and prevent it from a full crash. Anyone who tells you otherwise is simply licking billionaire boots.

        • WoahWoah@lemmy.world
          91·
          22 days ago

          The person you’re responding to is literally arguing that Elon can’t “functionally” pay the debt because it would make him less rich and lower Tesla’s share price.

          Their breath smells like Italian leather.

          • Stopthatgirl7@lemmy.worldOP
            11·
            22 days ago

            If you think for one minute I like Elon Musk, I invite you to check out all the negative articles, including this one, that I’ve posted about that piece of shit. I’d love for him to lose every red cent he’s got. I’ve hated him since before it was cool.

        • Laser@feddit.org
          2·
          22 days ago

          You don’t really understand the point I think, whether it’s correct or not I don’t know. His theoretical wealth is derived from the price of the last share sold. He probably can’t just sell ($13bn/current share price) shares and get $13bn out of that, there aren’t enough buy orders at that price, and you risk a panic sell by other holders. These other holders possible also include the banks were talking about, or at least related businesses and their clients.

          Long story short, if banks had him liquidate shares worth $13bn, his net worth would fall (not the banks direct problem, bit probably wouldn’t make future client acquisition easier); but it might be that they lose more money indirectly. All this calculation with a stock’s market cap is a bit like a house of cards; it’s really high, but don’t shake it too much. At least that’s an issue with overvalued stocks; sound businesses where the stock price reflects the company’s actual value, maybe even pays dividend, don’t have that problem.

          • Eximius@lemmy.world
            2·
            22 days ago

            He said it perfectly. There are sell off plans.

            If not only Musk but also the banks are stuck in this problem, it’s their own fault and incovenience. Not sure why you ignored his completely verbose explanation of how this problem is only Musk’s (and maybe the banks he made the deal with).

            Talking about individuals/market makers and their bots panic selling the stock is ridiculous, and subverts the idea of a free market. And as you say, the company’s value barely reflects it’s output, so it should happen, and it is odd that it didn’t.

            • Laser@feddit.org
              1·
              22 days ago

              If not only Musk but also the banks are stuck in this problem, it’s their own fault and incovenience. Not sure why you ignored his completely verbose explanation of how this problem is only Musk’s (and maybe the banks he made the deal with).

              That’s the thing, the banks fear it will be their problem. They don’t care about Tesla as a third party, but themselves.

              I’d love Musk to get fucked by this whole ordeal. This was rather about if the creditors allow it or of they’re afraid of the fallout.

              And you’re right, it won’t be all instantly sold, but it is a large amount of shares and I’d think it would have a negative impact on share price.

              • Eximius@lemmy.world
                1·
                22 days ago

                I guess it’s possible. But to me it sounds too much like an extra conspiracy. The banks could just sell off the stock (give zero fucks about other banks), and then force Musk to liquidate.

              • Sway@lemmy.worldEnglish
                1·
                22 days ago

                So, if his divestment of such a large amount shares in either company would have a negative impact on stock price, wouldn’t the other share holders have a say in the matter? They typically frown upon someone acting in a manner that will devalue their share prices. I’m honestly asking bc I don’t know the ins and outs, but I would assume that if Elon were to just try and sell shares to pay off his problem the pitch forks are going to come out from other share holders.

                Also, wouldn’t the banks potentially be in a conflict of interest? Presumably those institutions who gave him the loans have invested clients money into those stocks potentially? Again, just asking the question, bc this seems like a major boondoggle that could really fuck over a lot of people in a variety of ways.

      • JovialMicrobial@lemm.ee
        2·
        22 days ago

        Oh, so he gets to be treated like the rest of us now…right?

        If I stopped paying my mortgage, regardless of how bad off I may be, the bank is taking my house.

        Guess he should’ve been more responsible, not eaten avocado toast, and saved more or whatever the fuck conservatives say to struggling millennials and younger folks.

      • qjkxbmwvz@startrek.website
        1·
        22 days ago

        Does the stock necessarily get liquidated for these sorts of transactions though?

        Obviously if I owe the bank $100, they will want that in cash, not in $SPY or whatever. But for the Twitter levels of debt could stock just be transferred without being sold first? (Not a rhetorical question, I don’t know how this works.)

    • Cethin@lemmy.zipEnglish
      12·
      22 days ago

      My understanding is the money he used to pay for Twitter was from loans by banks, where they got mostly Tesla stock as collateral. Musk can pay back the loan to get the stock back, or the banks can sell it. This is done because loans aren’t taxed, but selling the stock would be. Now the banks are stuck with stocks that are worth less than the loans they gave out, so they are at a loss.

      • NotMyOldRedditName@lemmy.world
        7·
        22 days ago

        AFAIK that was the original plan, but wasn’t the final outcome.

        Elon doesn’t have anything tying up his stock on the purchase anymore. It’s one of the reasons for why he sold so much when he did the purchase.

        He may still have to sell stock to keep it alive, but it’s not collateral.

        edit: Here’s when the change happened

        https://www.theverge.com/2022/5/25/23141940/elon-musk-tesla-twitter-margin-loan-buyout-deal

        After a brutal month for Tesla stock, Elon Musk will no longer fund his Twitter buyout by borrowing against his Tesla ownership stake.

        In a filing with the US Securities and Exchange Commission, Musk announced the expiration of a series of margin loans against Tesla stock, which had been included as part of his original financing plan to acquire Twitter. As part of the announcement, Musk committed to providing an additional $6.25 billion in equity financing, bringing his total commitment to $33.5 billion.

        Just to reiterate what I said above though, he still has loans, they just aren’t collateralized by Tesla. He could lose twitter if he doesn’t pay the loans, and the only way he can pay them is either twitter making money, selling or collateralizing tesla/spacex shares, or finding additional funding.

        • OhNoMoreLemmy@lemmy.ml
          3·
          21 days ago

          If Musk doesn’t pay the loans the banks can take Twitter off him, but then they’re stuck with Twitter.

          It’s always lost money, but now Musk has driven off the advertisers and many of the high prestige users; got stuck in a bunch of pointless lawsuits he’s going to lose; and run up a lot of debt by refusing to pay people.

          And Musk knows this. The banks are fucked.

          • NotMyOldRedditName@lemmy.world
            3·
            21 days ago

            They might be stuck with Twitter, but then they could hire someone who doesn’t run off the advertisers and maybe turn it around for a smaller loss.

    • portifornia@lemmy.worldEnglish
      33·
      22 days ago

      I’m guessing here, I don’t think Musk, the person, took out the loans, I think xitter did. So if xitter defaults, Musk’s assets aren’t on the line.

      Edit for clarity: ‘leveraged buyout with debt reassignment post acquisition’

  • LEDZeppelin@lemmy.world
    20·
    23 days ago

    I can see a very real scenario where Drump gets elected, appoints Moron Musk as treasury secretary, and magically wipes off his Xitter debt never to be heard again

    • Voroxpete@sh.itjust.works
      7·
      23 days ago

      I’d say he can’t do that (the debt part) but apparently the US supreme court thinks a president can do whatever the fuck they want, so who knows at this point.