wsj.com
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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.

  • Cethin@lemmy.zipEnglish
    12·
    3 months 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·
      3 months 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·
        3 months 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
          2·
          3 months 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.