It’s no secret that Jalopnik isn’t exactly Elon Musk’s biggest fan. Sure, he’s responsible for the most important car of the 21st centuryand SpaceX is doing cool stuff when it doesn’t destroy the environmentbut it is also an intolerant piece of shit. Again, our team is a bunch of radical leftists who believe crazy things like “trans rights are human rights” and “billionaires should pay more taxes.” Other, more conservative media outlets have been much friendlier to Musk, so imagine our surprise when the Wall Street Journal of all papers said its purchase of Twitter was “the worst buyout for banks since the financial crisis.”
In order to raise the $44 billion needed to acquire Twitter, Musk had to borrow a total of $13 billion from seven different banks. Typically, when a bank lends money for a buyout like this, it quickly sells the debt. Unfortunately for Morgan Stanley, Bank of America and the other banks that helped finance the deal quickly discovered that this wouldn’t be an option unless they were willing to take significant losses on those loans. As a result, these loans have become a very costly headache for the banks involved and are now referred to as “hanging.”
We already knew that Twitter’s finances were a disaster. As soon as he took control, Musk intentionally turned the once-popular social media site into a playground for Nazis, alienating both users and advertisers. He then told those advertisers to go fuck themselves. and then they started chasing when they didn’t immediately return to his agenda. But digging a little deeper, it starts to feel like this deal was historically bad. Like objectively worse than anything we’ve seen since the financial crisis.
As new data from PitchBook LCD shows, banks have held these Twitter loans on their books longer than any other unsold deal in recent memory. Banks were saddled with far more outstanding debt in 2008 and 2009, but they were generally able to get it off their books in less than a year. Meanwhile, Musk’s debt is still hanging nearly two years later. Steven Kaplan, a finance professor at the University of Chicago, told the WSJ that it’s not only the largest amount of outstanding debt since the financial crisis, but also one of the largest he’s ever seen.
So how did the banks end up in this situation? Believe it or not, it seems that this happened. good old greed. Musk is rich, and the banks saw dollar signs when he showed up asking for money. Maybe the Twitter deal wasn’t great, but if they got involved early, they might have a chance at a more profitable deal in the future, like a SpaceX IPO.
And there’s always the possibility that the Twitter deal itself could end up being a good investment. Things may look bad now, but Musk a he’s finished paying his interest. In the incredibly unlikely event that he manages to turn things around at his online conspiracy convention, there’s still a chance he’ll also repay the principal. “At some price, they could sell it at a loss, but with Musk, they could end up getting 100 cents on the dollar, if things go the way he hoped,” Kaplan told the WSJ.
Will it ever happen? Anything is possible, but as of yet, there is no evidence that it will actually happen. Transinvestigation Station’s revenues are down, annual interest payments are costing the biology pussy site at least $1.5 billion, and Musk continues to look increasingly unstable. e while moving closer to being the kind of person who memorizes the age of consent in all 50 states. Will the bankers who made this deal learn their lesson? Probably not. But we can still take some comfort in the tears shed when their bonuses were cut.
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