The acquisition of Twitter, now X, is turning into a ruinous operation. While Elon Musk is scaring away advertisers, the unpaid loans are in the billions of dollars.
© Jared Siskin
– Elon Musk, August 24, at a charity gala in New York (United States).
Lending money to the richest man in the world is not necessarily a good idea. Especially when it comes to Elon Musk, the uncontrollable boss of Tesla, SpaceX and X (ex-Twitter). In 2022, ready to do anything to buy the social network, the entrepreneur had agreed to pay 44 billion dollars to put the blue bird in a cage. Except that he did not take this money out of his pocket… And the investors who lent him money are biting their fingers. According to revelations from Wall Street Journal published at the end of August, It would be one of the worst fiascos for banks since the 2008 financial crisis..
The bill left unpaid by Elon Musk is salty. Since 2022, $13 billion still not repaid to seven major banks. According to the Wall Street Journal, this affair threatens to limit their ability to lend money for other financial operations. The toll does not stop there: Since its acquisition, the value of the social network has plummeted. According to the Washington Post$24 billion invested by Elon Musk and his partners would have gone up in smoke. Among these unlucky (or ill-advised) investors, we find Saudi Prince Al-Waleed bin Talal Al Saud (loss of $1.36 billion), Twitter co-founder Jack Dorsey (loss of $720 million) and Oracle co-founder Larry Ellison (loss of $720 million).
At X, the flight of advertisers is likely to continue in 2025
How did the visionary at the head of Tesla and SpaceX get to this point? The crisis at X is mainly explained by a spectacular flight of advertising advertisers. Before the acquisition, the social network earned about 90% of its revenue from advertising. But Elon Musk scared off advertisers by posing as a zealous supporter of freedom of expression. More lax moderation has led to an explosion of hate speech and misinformation on X. This drift has made the platform less and less accessible. In his defense, Elon Musk regularly assures that illegal content is blocked.
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X doesn’t disclose its financial results. But a year after buying Twitter, they weren’t pretty. “We still have a negative cash flow, due to a 50% drop in advertising revenue and a significant debt load”Elon Musk confided during the summer of 2023. The situation is likely to get worse. First of all, A legal front has opened on the side of the former Twitter employeesIn July, the social network won a lawsuit in which former recruits demanded $500 million in severance pay. But other lawsuits target X.
And on the advertisers’ side, the debacle is not over. It must be said that Twitter audiences (and therefore the visibility of advertisements) do not seem very dynamic. In Europe, Monthly active users declined by 5% in first half of 2024, selon Social Media Today. This trend has not escaped advertisers. In a study published on September 5, Kantar surveyed 1,000 marketing managers around the world and 26% of them plan to reduce their advertising spending on X in 2025. A historic decline, according to the authors of the study. But Elon Musk may not have lost everything. “Ironically, reducing advertiser spending on X will make consumers happier with the platform because they will be exposed to fewer ads.”notes Gonca Bubani, director of opinion leader analysis at Kantar.
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Crisis at X Spills Over to Elon Musk’s Other Companies
To make matters worse, the crisis at X is having repercussions on its other companies. After falling out with the European Commission, Elon Musk has engaged in a showdown with Brazil. At the end of August, the country decided to block the social network because the company refused to close accounts close to the far-right former president Jair Bolsonaro. Elon Musk protested an attempt at censorship while the Brazilian courts accused these accounts of spreading disinformation and threatening democracy. The dispute has tarnished Starlink, Elon Musk’s satellite constellation: to force X to pay its fines (more than $3 million to date), Brazil effectively froze the company’s accounts. A decision contested in court by Starlink.
Despite these many setbacks, Elon Musk maintains great ambitions for X. The entrepreneur dreams of making the social network an all-purpose application, or an “everything app.” The platform could, for example, allow online payments to be made.like PayPal (one of Elon Musk’s first companies). Above all, X owns 25% of the artificial intelligence company xAI, a booming sector. On the social network, premium users have access to the generative AI Grok on condition that they pay 8.4 euros per month. But it is not certain that these subscriptions will compensate for the drop in advertising revenue for the moment…
Also read: Elon Musk: Tesla, X, SpaceX… Could failures and scandals ruin his empire?
In the meantime, Elon Musk is waging his political battles on X. In Europe, exposed to the threat of a mega-fine (still because of the social network), he insults European Commissioner Thierry Breton. In the United States, he has become one of the most fervent supporters of Donald Trump, the Republican candidate in the presidential election that will take place in November. In the event of victory, Elon Musk could even lead an audit mission to examine government spendingwhich he considers too excessive. One question logically scares some investors: with all these occupations, when will Elon Musk take care of Tesla and SpaceX? A question that we share when seeing the leader more and more active on X. This week, Elon Musk was running at a frenetic pace of 74 posts per day on average
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