Elon Musk’s multi-billion dollar takeover of Twitter (now X) has been cited as the worst buyout for banks since the 2008-09 financial crisis by experts.
A group of seven banks, including Bank of America and Morgan Stanley, lent $13 billion to Musk to take Twitter private in October 2022.
Typically, the loans are sold on quickly, but in the case of X, the loans have become ‘hung’, racking up big losses for lenders.
According to the Wall Street Journal, the loans have been hung longer than every similar unsold deal for which the research firm had complete records since the financial crisis.
A professor of finance at the University of Chicago goes as far as to say that Twitter is the biggest hung deal by dollar amount of all time. “The loans have weighed on the banks for much longer than other hung deals we’ve seen,” Steven Kaplan told the WSJ.
X has been paying the interest on the loans, which are hefty because below investment-grade debt has wider rate spreads than investment-grade, the article said.
The banks could still be made whole if X can cover its interest obligations and repay the principal when the loans mature, but rumours are that the company is sustaining major losses.
Advertisers have been abandoning the platform in spades in recent months, with Alex Wilson, a senior strategist at London agency Pitch, telling City A.M. that its unregulated nature has made it hard to convince clients to part way with money on the site.
“The verification system is a mess, half your followers are now sexbots, the most interesting people have moved somewhere else, the people still there are posting less, and your timeline is just and endless stream of misery”, he said.
“How do you make the case for advertising on a platform like that?”
According to Fortune reports, the last publicly available figures prior to Musk’s acquisition, from Q2 of 2022, had Twitter revenue at $661 million.
But after you account for inflation, revenue has actually collapsed by 84 per cent, in today’s dollars.
Related: Musk’s image generation tool ‘unleashing torrent of misinformation’
