Banks Ready to Offload $3 Billion in Previously Unmoveable X Debt

There’s quite a large Elon Musk premium in the marketplace. The surge in his net worth since the presidential election has made him history’s first $400 billion-plus man.

But there’s a discount on the debt borrowed by Musk’s X. Banks are slated to offload as much as $3 billion in loans that helped finance the acquisition of the social media platform to investors this week. They expect to get 90 to 95 cents on the dollar. It’s actually not a bad deal, considering where things were just months ago.

Why Voting Matters (For Elon)

You certainly recall 2022, when Musk made a splashy $44 billion takeover offer for what was then known as Twitter. Likely more hazy are the details, namely that a group of banks including Morgan Stanley, Bank of America, Barclays, Société Générale, and BNP Paribas helped finance the deal with roughly $13 billion in debt, creating just under $1 billion in annual debt servicing fees for Twitter, now X, in the process.

It’s perfectly normal for banks to sell loans like these to investors after a deal is sealed, but X’s debt has proven difficult to offload. Musk laid off thousands and reined in content moderation, scaring off advertisers and hammering X’s revenues in the process. That left the banks struggling to find value, until a recent rebound: 

• When lenders tried to sell some of X’s debt towards the end of 2022, bids would have seen them take a 20% writedown on the debt, Reuters reported at the time. The loans have remained stuck on the banks’ balance sheets, or ‘hung’, for longer than any other similar deal since the 2008 financial crisis, according to PitchBook LCD.
• But, as they say, fortune favors the bold: After President Donald Trump won the election with Musk as his top financial backer, banks began re-evaluating the debt’s prospects given his companies now have a line to the most powerful office in the world. Morgan Stanley, The Wall Street Journal reported, has phoned investors in advance of a planned sale of $3 billion in X debt holdings that could fetch 90 to 95 cents on the dollar this week.

X Marks the Denial: “Our user growth is stagnant, revenue is unimpressive, and we’re barely breaking even,” Musk told X staff in an email recently, the WSJ reported. Or not: Musk claimed on X that he “sent no such email.”