Zinger Key Points
- Elon Musk shared his thoughts on X's financials and growth in a recent email to employees.
- With X gaining financial momentum and Musk having a friendship with Donald Trump, banks who financed his X buyout are ready to sell.
Banks who helped finance Elon Musk's $44 billion acquisition of social media platform Twitter, now known as X, are ready to sell off their loans at 5% to 10% discounts years after the deal was completed.
What Happened: Musk said X saw record usage during the 2024 presidential election, but growth may be slowing into the new 2025 year.
A January email Musk sent to X staff highlighted his concerns for the company's financial state.
"Our user growth is stagnant, revenue is unimpressive, and we're barely breaking even," Musk said in an email, as seen by The Wall Street Journal.
While Musk was unimpressed with the financial state of X, the comment of breaking even comes after years of losses for the social media company. Musk highlighted the rising influence X has in the same email.
"Over the last few months, we've witnessed the power of X in shaping national conversations and outcomes. We are also seeing other platforms begin to adopt our commitment to free speech and unbiased truth."
The comment on other platforms and free speech could be in reference to Meta Platforms META, the owner of Facebook and Instagram. Meta CEO Mark Zuckerberg announced the platforms would move to a Community Notes system similar to X and get rid of its existing content moderation practices.
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Why It's Important: While Musk paid $44 billion for X back in 2022, the valuation has not held up for those who helped take the company private.
Fidelity, which owns shares of X Holdings in the Fidelity Blue Chip Growth Fund (FBGRX), valued X at $12.3 billion recently. While the company increased its valuation of X by 32.3% at the time, it values X at 72% less than Musk paid.
As X grows in influence and Musk sees his friendship with Donald Trump boost his presence worldwide, banks who helped finance the X transaction are looking to sell off their debt holdings, according to the report.
The Wall Street Journal reported that Morgan Stanley MS bankers are planning to sell up to $3 billion of debt in X owned by Bank of America, Barclays and Morgan Stanley itself.
The banks are willing to sell their debt at 90 cents to 95 cents on the dollar, taking less than what they paid to help finance the deal.
Banks invested approximately $13 billion to finance the Twitter acquisition in 2022, according to the report. The hefty acquisition cost, combined with a decline in value following advertiser exits, has left banks holding debt they have struggled to offload without incurring a loss.
With the potential that X's financials have stabled with break even earnings along with Musk's friendship with Trump, banks could see this as the perfect time to sell off unwanted debt in X.
The report said that some investors have reached out to banks with interest in buying up debt in X due to the improving financials and public image.
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