Elon Musk's acquisition of Twitter has turned out to be a challenging endeavor, so much so that banks involved in financing the deal are now facing financial strain.
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Since the 2008 financial crisis, countless corporate buyouts have occurred, yet none have been as problematic as Muskâs $44 billion takeover of Twitter, according to the banks holding the debt. A recent report by the Wall Street Journal reveals that approximately $13 billion in loans used to fund the purchase of Twitter (now rebranded as X) remain stuck on the banks' balance sheets, with no clear path to offload them.
In typical debt financing deals, banks sell off portions of the debt to other investors. However, because X is a private entity, this process has been particularly difficult. When Musk purchased Twitter, it was valued at around $38 billion, a figure that made his $44 billion offer seem overly generous.
By contrast, in 2020, two years before Muskâs acquisition, the company reached a peak valuation of $62 billion. Since going private, X is not obligated to disclose its revenue figures, making it challenging to assess its current market value.
While the company estimated its worth at about $19 billion in late 2023, Fidelity analysts in January 2024 placed it closer to $12.5 billion.
The banks holding the majority of these loans, including Morgan Stanley and Bank of America, have seen the value of their holdings decline as X struggles with revenue generation.
Although the banks continue to receive interest payments, the loans have become burdensome liabilities on their balance sheets. Barclays, one of the banks impacted by these "hung loans," has even resorted to cutting employee salaries by as much as 40% due to multiple stalled deals, with X being the most significant among them.
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