In 2022, in a process full of twists and turns that began in April and was only completed in October, the American billionaire of South African origin Elon Musk bought Twitter, whose name would later be changed to X. Two years later, an aura of uncertainty hangs over the financial situation of the social network.
This week, the American The Wall Street Journal published a report that pointed out that the loans totaling US$ 13 billion that seven banks, including Bank of America and Morgan Stanley, granted to Musk to help in the purchase of the then Twitter (the total value of the deal was US$ 44 billion) was the worst financing deal for corporate acquisitions since the financial crisis of 2008/09, according to a report by the financial data company PitchBook LCD.
Banks that lend money for company purchases typically try to sell the debt to other investors soon afterward, but the banks involved in the X purchase were unable to do so, the Journal reported, leaving the loans to Musk “hanging around,” jargon for numbers that get “stuck” on financial institutions’ balance sheets.
As a result, some of these banks have had to write down loan amounts by hundreds of millions of dollars to pass them on, the report found, which has contributed to their slide in investment banking rankings.
At Barclays, top M&A executives saw their earnings cut by 40% in 2023 from the previous year due to multiple “hanging loans,” but the X case was by far the worst, sources told the Journal.
The difficulty these banks have in passing on the loans, even with Musk paying significant interest, stems from X’s murky financial situation.
In October last year, The New York Times had access to internal company documents indicating that the company itself assessed its market value at US$19 billion, less than half of what Musk had paid for the purchase in 2022.
The billionaire has been denouncing since last year that an advertising boycott has been shaking X’s finances. In December, he said in a post that Walt Disney Company CEO Bob Iger should be fired.
The comment comes after the New Mexico Attorney General’s Office filed a civil lawsuit against Meta and its CEO Mark Zuckerberg, alleging that the company’s social media platforms are “prime venues for predators to trade child pornography and solicit sex from minors.”
Musk criticized Disney’s decision to keep advertising on Meta’s networks but pull ads from X after the billionaire made a comment a few weeks earlier endorsing an anti-Semitic publication – he later apologized.
“Bob Iger thinks it’s cool to advertise next to child exploitation material. A guy with integrity,” Musk posted on X.
In late November 2023, at an event hosted by The New York Times, Musk told companies that were pulling ads from X to “f*ck themselves” and quoted Iger: “Is that clear? Hey, Bob, if you’re in the audience, this is how I feel,” he said.
This month, X filed a federal lawsuit in Texas against the World Federation of Advertisers (WFA) and its affiliates, alleging that the federation engaged in “anti-competitive behavior” and organized an advertising boycott that hurt the social network’s financial health after Musk bought it.
A few days later, the WFA confirmed the interruption of an initiative launched in 2019, the Global Alliance for Responsible Media (GARM), which, according to a July report by the United States House Judiciary Committee, had sought strategies to block advertising from conservative media outlets in the United States, such as Fox News, The Daily Wire and Breitbart News, in an action that, the panel argued, may have constituted a violation of antitrust laws and a threat to freedom of expression in the United States.
WFA CEO Stephan Loerke said in an email to WFA members that GARM was a nonprofit with limited resources and said its defense in the X lawsuit would demonstrate “our full adherence to competition rules in all our activities.” For now, questions about X’s financial situation remain.
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