Technology
Banks That Loaned Musk $13 Billion to Buy Twitter May Regret It
X, formerly often called Twitter, looks as if a reasonably bad investment at once.
As readers may recall, Elon Musk borrowed $13 billion from Morgan Stanley, Bank of America, and five other major banks to finance the $44 billion acquisition. According to According to the WSJ, the deal became the worst merger financing deal for banks because the 2008-09 financial crisis.
Why? When banks lend money for acquisitions, they typically sell the debt to others, earning commissions on the deal. That wasn’t possible for X due to its poor financial condition, so the loans became a liability for the banks, becoming, in industry jargon, “suspended contracts.”
The WSJ notes that the banks agreed to guarantee these loans “largely because the temptation of banking the richest person in the world was too tempting to refuse.” Now that appears like a costly mistake unless they’ll cough up interest on X in addition to repayment of the principal when the loans mature.