Elon Musk’s Twitter Buyout Is Officially the Worst Deal Since Financial Crisis

Dan Ladden-Hall. August 20, 2024

  • Worst Merger-Finance Deal: The loans used by Elon Musk to buy Twitter have become the worst merger-finance deal for banks since the 2008-09 financial crisis.
  • Stuck Loans: Banks involved in the deal, including Bank of America and Morgan Stanley, have been unable to sell the debt without taking huge losses.
  • Financial Decline: The value of the loans declined significantly after Musk’s $44 billion takeover, with X (formerly Twitter) now worth around $19 billion.
  • Impact on Banks: The unsold loans have negatively affected the banks’ performance and the compensation of top investment bankers.

Loans that Elon Musk used to buy Twitter have become the worst merger-finance deal for banks since the financial crisis of 2008-09, according to a report.

Seven banks involved in the deal, including the likes of Bank of America and Morgan Stanley, gave Musk’s holding company about $13 billion to take the social media giant private in 2022. According to The Wall Street Journal, banks who lend cash for takeovers typically try to sell the debt to other investors fast—but that has not happened with the Twitter deal.

The Journal reports that banks haven’t been able to sell the debt without taking huge losses, predominantly because of the company’s poor financial performance. That means the loans have remained “hung,” or stuck, on banks’ balance sheets.

The value of the loans declined after Musk’s $44 billion takeover of Twitter—which he’s since renamed X—was completed, but the deal is now in “historic territory” in terms of poor performance, according to the Journal.

Citing data from PitchBook LCD, the “Twitter loans have been hung longer than every similar unsold deal since the 2008-09 financial crisis for which the research firm has complete records,” the report says.

While the lenders have been able to receive large interest payments on the X loans, some of the banks have marked down the value of the loans to the tune of hundreds of millions of dollars.

Last October, X said it was worth around $19 billion, around 55 percent less than the price Musk paid for the company a year earlier. The company under his tenure has had a fraught relationship with advertisers—which provide the majority of its revenue—with Musk telling some to “go fuck yourself” after they abandoned the site. X also sued an advertising coalition and some of its members earlier this month alleging it conspired a boycott of the platform that cost the company billions of dollars.

The Twitter loans and other hung deals contributed to some of the banks falling down the ranks in the investment banking league tables, according to the Journal, while some bankers have also seen the loans affect their pay.

Top investment bankers on Barclays’ mergers and acquisitions team were told last year their compensation would be cut by a minimum of 40 percent from the prior year. The bank had multiple hung deals that had hit its overall performance, but X was by far the biggest, sources told the Journal.