It looks like Elon Musk’s $44 billion acquisition of Twitter—which is now rebranded as X—was a bad investment. Musk obtained a $13 billion loan as part of the agreement from a group of banks that included Morgan Stanley, Bank of America, and five additional financial institutions. For these banks, what first appeared to be a high-profile opportunity has evolved into one of the most problematic merger-finance agreements since the financial crisis of 2008–2009. Banks that lend money for company takeovers usually sell that debt to other investors so they can get their money back and get paid fees. But this has been challenging due to X’s unstable financial status, resulting in what the industry refers to as a “hung deal.” The banks are stuck retaining the debt rather than swiftly disposing of it.
As stated in a report by The Wall Street Journal, this situation developed in part because the banks were enticed by the opportunity to work with the richest person in the world. The perception of Musk’s attainment likely invaded these institutions’ values in money matters and caused them to ignore any possible risks. Unless, of course, they can extract interest payments from X and ultimately get a return of principal when loans are mature, these banks are staring at big losses.
The X deal underscores how treacherous high-profile, high-risk ventures can be. Musk’s ownership of the platform has drawn increasing attention for its disorderly transitions and questionable initiatives that have, in turn, caused decreasing revenues and the instability of the user base. For the banks that took part in this, the truth of their situation is starting to dawn upon them. What appeared to be an opportunity to become a part of Musk’s great vision had morphed into a major financial hangover.