Wall Street banks plan to begin selling up to $3 billion in debt next week from social network X, controlled by billionaire Elon Musk, out of a total debt of $13 billion, Reuters reported on Friday, citing people familiar with the matter.
Image source: X
Morgan Stanley has already reached out to investors ahead of the planned sale, the people said. According to The Wall Street Journal, banks are hoping to sell the debt at a slight discount – at a rate of 90 to 95 cents on the US dollar. At the same time, the banks plan to sell senior debt – the company’s liabilities that are reimbursed upon its liquidation first, while preserving junior assets.
Morgan Stanley, as well as Bank of America and Barclays, provided Musk with about $13 billion in funds to complete his purchase of social platform X, then known as Twitter, for $44 billion in 2022. Musk clearly overpaid for Twitter – the purchase price was high even at the time of the deal, and the company’s unstable performance indicators reduced its value. The deal is considered one of the worst among those that banks have agreed to finance since the financial crisis of 2008, writes The Wall Street Journal.
In January, Musk addressed X employees with a letter in which he pointed out the growing influence and power of the company, while noting that its financial situation was not yet encouraging. “Our user growth is stagnant, revenue is unimpressive, and we are barely breaking even,” he said in the letter, seen by The Wall Street Journal. In turn, Musk, after a few hours of publication of the newspaper, reported on the social network X that he had not sent any such letters.
Banks never opened in their reporting, how they evaluate loans. Some of the investors who invested in the X campaign wrote off their shares in the company by as much as 75 %, said The Wall Street Journal. At the same time, according to its sources, the company’s financial indicators are steadily improved, as some brands began to spend money on the platform again.