Image credit: la nouvelle Tribune
The group of banks that lent Elon Musk $13 billion to buy Twitter (now called X) might be regretting their decision. As the social media platform struggles to make a profit, these banks are reportedly worried about the risks of their large investment.
Musk's takeover of Twitter in October 2022 was one of the most talked-about deals in recent history. To facilitate the $44 billion purchase, a group of major banks, including Morgan Stanley, Bank of America, and Barclays, provided $13 billion in loans. At the time, the loan seemed like a safe bet, given Musk’s track record of success with companies like Tesla and SpaceX.
However, the reality of running a social media platform has proven to be far more complex than anticipated. Since taking control, Musk has made sweeping changes to Twitter, from layoffs and policy overhauls to the platform’s rebranding as X. While these moves were intended to reshape the platform, they have also led to significant instability, both in user engagement and in advertising revenue.
The banks are reportedly concerned about the platform’s ability to generate enough cash flow to service the debt. Twitter’s revenue has taken a hit since Musk’s takeover, with advertisers pulling back due to uncertainty over the platform’s direction and content moderation policies. Additionally, the social media landscape is becoming increasingly competitive, with platforms like TikTok and emerging alternatives challenging Twitter's dominance.
Given these challenges, the banks may be reconsidering the wisdom of their investment. The original loans are tied to Twitter’s ability to generate revenue, but with the platform underperforming, the risk of default becomes more tangible. This situation is particularly concerning for the banks, as they may be forced to sell the debt at a loss if Twitter's financial outlook does not improve.