Banks that funded Elon Musk’s X takeover are in major trouble now as they struggle to load off debt

Elon Musk had to delve deep into his accounts last year to secure a gigantic amount for acquiring the social media platform now known as X. To ensure the funding for the acquisition; the tech magnate found himself in need of a staggering $13 billion in loans from seven prominent banks to assemble the substantial purchase price of $44 billion, nearly a year ago.

Unfortunately, the aftermath of this ambitious acquisition has left these financial institutions reeling, as the Wall Street Journal reported, attributing the platform’s declining value over the past 12 months to Musk’s leadership.

Struggling to unload the debt
The financial figures are nothing short of astonishing. The seven banks involved in the deal, including prominent names such as Morgan Stanley, Bank of America, and Barclays, now face the prospect of enduring losses of at least 15 percent, totaling around $2 billion just for this year.

This ill-fated wager on the world’s wealthiest individual has seemingly backfired spectacularly.

These banks initially hoped to divest themselves of the debt by Labor Day, but the situation has not been as anticipated. Instead, they are now preparing to offload portions of this financial burden, according to sources cited by the Wall Street Journal.

To compound their woes, if Musk’s social media platform receives a low credit rating, the banks may encounter even more incredible difficulty in shedding this financial load.

In essence, the longer they hold onto this debt, the more precarious the situation becomes, and regulators may intensify their scrutiny of the banks.

Hung deal
As the Wall Street Journal outlined, the debt associated with X’s acquisition is currently one of the most extensive and long-lasting “hung” deals. Such arrangements often result in banks incurring significant losses when financing acquisitions fail to yield the anticipated returns.

Amid this financial turmoil, Musk’s seemingly incongruent decisions, including rebranding Twitter as “X,” tolerating the dissemination of misinformation, and implementing widespread layoffs, have prompted advertisers to withdraw, causing substantial deficits on the company’s balance sheets.

Resolute in the face of adversity
A recent study by marketing consultancy Ebiquity found that most of the platform’s largest advertising spenders have ceased advertising on it following Musk’s takeover.

Despite the bleak outlook, Musk and CEO Linda Yaccarino remain resolute in believing that X will turn a profit as early as next year.

One certainty remains: the banks are undoubtedly hoping that their faith in this optimism is not misplaced.