Overview of the Sale
A consortium of banks, led by Morgan Stanley, has successfully sold $5.5 billion in debt tied to Elon Musk’s acquisition of Twitter, now rebranded as X. This sale marks a significant step in reducing the banks’ exposure to X-related debt, which initially totaled nearly $13 billion following Musk’s $44 billion takeover in 2022.
Key Details:
- Banks Involved: The sale was led by Morgan Stanley and included other major financial institutions such as Bank of America and Barclays. The broader financing group also comprised MUFG, BNP Paribas, Mizuho, and Société Générale[1][8].
- Sale Amount: Initially planned at $3 billion, strong investor demand allowed the banks to sell an additional portion, reaching a total of $5.5 billion[4][6].
- Price per Dollar: The debt was sold at 97 cents on the dollar after initial plans for a lower price point around 95 cents due to increased investor interest[2][8].
- Interest Rate: The loans carry an interest rate of approximately 11%, reflecting their high-risk nature[5][8].
- Remaining Debt: After this sale, banks still hold about $6 billion in riskier X-related loans[1][2].
Factors Influencing Demand
Several factors contributed to the surge in demand for X’s debt:
- Elon Musk’s Political Influence: Growing ties between Elon Musk and political figures like President Trump have heightened investor interest in his ventures[2][3].
- Return of Advertisers: Major companies such as Amazon are increasing ad spending on X again after a period where advertisers were hesitant due to controversy surrounding Musk’s leadership decisions[2]. Apple is reportedly considering resuming advertising efforts as well.
- Financial Recovery Indicators:
- In 2024, X reported EBITDA (Earnings Before Interest Taxes Depreciation Amortization) at $1.25 billion.
- Revenue stood at approximately $2.7 billion.
- These figures indicate significant financial recovery compared to previous years (e.g., EBITDA was about half that amount in 2021)[2].
- Stake in AI Venture xAI:
- Investors are also attracted by X’s stake (10%) in Elon Musk’s AI venture xAI.
- Plans exist for increasing this stake further up to 25% over time[3].
Impact on Banks
The successful offloading reduces financial risks associated with holding large amounts of unsold debt from high-profile acquisitions like Twitter/X.
Future Outlook
Despite selling off a substantial portion of their exposure ($5.5B), banks remain exposed through another approximately $6B worth of riskier loans related to this deal.
Overall, this transaction reflects renewed confidence among investors regarding Elon Musk’s ventures amidst his growing political influence and improvements within his companies’ financials and strategic investments like AI ventures.
References:[1],[2],[3],[4],[5]
Citations:
[1] https://slguardian.org/wall-street-banks-dump-5-5b-twitter-debt-from-musks-takeover/
[2] https://pune.news/market/wall-street-sells-xs-debt-at-a-premium-amid-musks-growing-political-ties-302154/
[3] https://economictimes.indiatimes.com/news/international/us/elon-musks-x-debt-bank-consortium-sells-5-5-billion-of-loans-amid-rising-investor-demand/articleshow/117989959.cms
[4] https://www.business-standard.com/world-news/morgan-stanley-led-banks-sell-5-5-billion-of-x-debt-on-demand-surge-125020601901_1.html
[5] https://markets.businessinsider.com/news/stocks/banks-sell-5-5b-of-x-s-debt-as-interest-in-politically-influential-musk-grows-1034320773
[6] https://markets.businessinsider.com/news/stocks/morgan-stanley-boosts-x-debt-sale-bloomberg-reports-1034311173
[7] https://ground.news/article/banks-sell-down-55-bln-of-musks-x-debt-to-investors-reports
[8] https://finance.yahoo.com/news/banks-sell-down-5-5-191251393.html
[9] https://www.ft.com/content/b3ad580a-3927-453b-81ba-632bd923b552
[10] https://www.bloomberg.com/news/articles/2025-02-04/morgan-stanley-boosts-x-debt-sale-as-investors-embrace-musk-bet
[11] https://theprint.in/tech/banks-sell-down-5-5-billion-of-musks-x-debt-to-investors-source/2481474/
[12] https://www.wsj.com/finance/banks-sell-5-5-billion-of-x-loans-after-investor-interest-surges-4b84f89c
