Elon Musk Assures Bankers They Won’t Lose Money on Twitter Deal

Introduction

Elon Musk, the billionaire entrepreneur, has reportedly assured bankers that they will not lose money on the blockbuster buyout of Twitter, for which they provided a $13 billion loan. However, it is worth noting that banks are already projected to experience losses of at least $2 billion if they were to sell the debt.

The Twitter Buyout and Risky Investment

Elon Musk secured various sources of loans, including $13 billion from seven banks, to fund the $44 billion purchase of Twitter last year. At the time, Twitter was a negative cash-flow business, and lenders were already aware of the risks involved in their investment.

According to Angelo Zino, a senior industry analyst at CFRA, the true value of the deal lies in the relationship with Elon Musk.

Challenges and Negative Cash Flow

However, nine months after the purchase, it was revealed that Twitter, now known as X, continues to experience negative cash flow. This is partially attributed to a significant drop in advertising revenue, which occurred after Musk made an antisemitic comment on the platform.

Several major advertisers, such as IBM, Apple, Walmart, and Disney, decided to discontinue their advertising on Twitter following Musk's controversial remark. Musk later acknowledged that his comment was "the worst and dumbest post" he had ever made.

Promises and Potential Losses

Despite the challenges, Musk has allegedly made promises to bankers that they will not suffer losses on the Twitter deal. However, it is unclear when these assurances were given. The banks may face difficulties in offloading their debt by 2024, which means they may need to keep the debt on their balance sheets at a significant discount.

Neither Musk nor a representative from X has responded to requests for comment at this time.

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By: lloydlee@insider.com (Lloyd Lee)
Title: Elon Musk Assures Bankers They Won’t Lose Money on Twitter Deal
Sourced From: www.businessinsider.com/elon-musk-twitter-buyout-deal-x-banks-loans-losses-lenders-2023-12
Published Date: Sat, 16 Dec 2023 04:22:11 +0000