Everyone knew Elon Musk was overpaying for Twitter when he bought the social media platform back in 2022. That’s precisely why the billionaire tried to back out of the deal before being forced to finalize the purchase after a court order. But we’re now learning more details about just how dumb buying Twitter was in financial terms, according to a report from the Wall Street Journal Tuesday. Apparently, it was the worst deal since the global financial crisis in 2008.
Seven banks loaned Elon Musk money totaling $13 billion in 2022 to help him buy Twitter, now known by the obnoxiously generic name X, and every single one has been unable to offload the debt without incurring “major losses” from the deal, according to the Wall Street Journal. This means the loans are just sitting on the balance sheets of these banks. In fact, the Journal explains that this wasn’t just one of the worst deals since 2008, it’s one of the worst deals of all time.
Musk and other investors brought roughly $30 billion in cash to the table, while the banks supplied the other $13 billion to finalize the purchase. But we now know the people who work at those banks have felt considerable financial pain from agreeing to something so stupid. How much pain? As the Journal tells it, top investment bankers at Barclays were told at a dinner in late 2023 that everyone would be getting at least a 40% pay cut. After everyone got their bonuses for the year, about 50 of the company’s 200 directors left, according to the Journal.
Every bank in the deal, including Morgan Stanley, Bank of America, Barclays, Mitsubishi UFJ Financial Group, BNP Paribas, Mizuho, and Société Générale, have been struggling with this hanging on their books. And talks about restructuring the deal haven’t been fruitful, according to the Journal. As countless journalists at places like Bloomberg have previously pointed out, those same banks want to have access to anything Musk may be cooking up in the future, including a possible IPO of SpaceX, arguably the smartest thing the billionaire ever founded. SpaceX is a powerhouse in commercial space and benefits tremendously from government contracts. Starlink, the satellite internet arm of SpaceX, may even be spun off and could see its own IPO in the future. And the hype around all of that puts these banks in a tricky position as Musk continues to hurt their financial positions with his dumb Twitter purchase.
X is currently valued at roughly $19 billion, less than half what Musk paid for it. And yet Musk has maintained a reputation among some of the dumbest people that he’s still a genius. The tech oligarch remains surrounded by a bubble of sycophants on X constantly telling him what an amazing person he is. The entire spectacle is likely a demonstration of the primary reason he bought the site. Musk bought himself a safe space where everyone is constantly telling him he’s a genius. And that’s worth a lot of money to one of the wealthiest men in the world.
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