Twitter takeover by Elon Musk caused major problems for banks

The loans that Elon Musk took out for the Twitter takeover are, according to a report, the worst merger financing for banks since the financial crisis of 2008/09.

The seven banks involved in the deal, including Bank of America and Morgan Stanley, provided about $13 billion to take the social media giant private in 2022.

Typically, banks that lend money for acquisitions try to quickly sell the debt to other investors, but that was not possible in the Twitter deal due to the company's poor financial performance since Musk took over.

This meant that the loans remained stuck on the banks’ balance sheets.

Elon Musk's Twitter takeover is record-breakingly terrible

The value of the loans fell after the completion of the Twitter takeover for $44 billionnow renamed X. The deal is now in “historic territory” for poor performance, the report says. The Wall Street Journal.

Citing data from PitchBook LCD, Twitter loans hung around longer than any comparable unsold loan since the 2008-09 financial crisis.

Some of the banks involved in the loan have reduced the value of the loans by hundreds of millions of dollars.

Despite the high interest payments on the X-loans, the weak performance affected the banks' overall results and contributed to some slipping in the investment banking rankings.

The impact on compensation cannot be overlooked

The Twitter loans and other stalled deals have also affected the compensation of some bankers. Top investment bankers on Barclays' mergers and acquisitions team were told last year that their pay would be cut by at least 40 percent compared to the previous year. One of the biggest contributors to this decline in performance was X.

X has faced numerous challenges since Musk took over, including a difficult relationship with advertisers who generate the majority of its revenue. The company filed a lawsuit earlier this month against an advertising coalition and some of its members, claiming they conspired to boycott the platform, costing the company billions of dollars.

How much money did Elon lose on Twitter?

As of 2024, Elon Musk's investment in Twitter (now X) has resulted in significant financial losses.

While the exact amount is difficult to quantify due to ongoing litigation and fluctuating market conditions, estimates suggest that Musk lost billions of dollars in the takeover.

Several factors contributed to these losses, including:

• Lower advertising revenue: Advertisers have reduced their spending on Twitter due to concerns about content moderation and potential brand damage.
• Higher costs: Musk has made significant changes to the platform, including layoffs and new features that have increased operating costs.
• Debt obligations: The acquisition of Twitter came with significant debt, which further increased Musk's financial burden.

It is important to note that the situation is still evolving and the ultimate financial impact of Musk's ownership of Twitter may change over time.

Why are Twitter employees suing Elon Musk?

Twitter employees are suing Elon Musk on several grounds, primarily related to his conduct since taking over the company in 2022.

Here are some of the main reasons for the lawsuits:

• Mass layoffs: One of the biggest problems is the mass layoffs that took place shortly after Musk took over. Many employees were fired without warning or severance pay, which led to legal disputes.
• Working conditions: Employees have also complained about deteriorating working conditions, including longer working hours, increased workloads and a more hostile work environment.
• Stock options: Some employees have sued over the elimination of stock options that were a significant part of their compensation package.
• Age discrimination: There were allegations of age discrimination in the layoffs, with older employees being disproportionately affected.
• retribution: Employees who have spoken out against Musk's policies or filed complaints report retaliation, including demotions, firings, and other adverse actions.

These lawsuits reflect the significant changes and challenges Twitter employees faced under Musk's leadership.

Taken together, all of these ongoing problems have further contributed to Twitter's poor financial condition under Musk's ownership.

Photo credit for featured image: Ravi Sharma/Unsplash