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Twitter’s debt and value have plunged painfully since Elon Musk takeover: sources


Big banks and investors that helped Elon Musk complete his $44 billion takeover of Twitter are taking a shower on their equity stakes and loans to the money-bleeding social media site, based on financial filings and sources interviewed by The Post.

Fidelity Investments has been forced to write down down the initial stake it took in Twitter — valued at $19.66 million last October — to $8.63 million, based on a recent securities filing by Fidelity.

But insiders say the markdown on Twitter’s equity value may very well be even steeper in point of fact, with multiple sources noting that the $13 billion Musk borrowed against Twitter to fund the buyout wouldn’t even sell for 50 cents on the dollar.

Morgan Stanley led a gaggle that included Bank of America, Mitsubishi, BNP Paribas, Mizuho and Societe Generale that underwrote the $13 billion loan for the Oct. 27 deal. Nonetheless, Morgan Stanley has not tried to syndicate the loan because there may be a really limited marketplace for the paper and it’s well underwater, two well-placed sources said.

“Nobody is touching this debt until a latest CEO is hired and folks can get clarity on the revenues,” considered one of the sources said.

“I don’t think they will sell it at 50 cents on the dollar in the event that they tried,” said the second source, who’s considered one of the larger buyers of secondary loans.

These loans should be marked down by 70% of their value, based on one source who structures leveraged loans and is following the matter. That estimate is much more drastic than the markdown of as much as 20% that Reuters reported Morgan Stanley will take to reflect the current value of the loan when the bank reports earnings on Jan. 17.

Morgan Stanley refused to comment when contacted by The Post on Tuesday.

Elon Musk took the reins on Twitter in a $44 billion takeover last 12 months.AP

Interest on the loans is about $1.3 billion a 12 months, The Post previously reported. Debt is senior to equity within the capital structure.

Musk took Twitter private after paying $54.20 a share for the positioning and shouldn’t be required to share financials with anyone aside from his banks. There is theory Twitter’s revenue is now on pace over the subsequent 12 months to be $1 billion after reaching $5 billion in 2021, considered one of the sources said.

Musk has given mixed signals on Twitter’s current price. In early December, the tech mogul said he was seeking to sell stakes in Twitter at the identical price he paid, indicating it had not dropped in value. Yet, he tweeted on Dec. 18 that Twitter “has been within the fast lane to bankruptcy since May.”

The lenders consider the potential for bankruptcy is another excuse not to purchase Twitter debt, the source.

“Who desires to go against Musk in a restructuring?” considered one of the lenders said.

Musk has faced significant scrutiny since taking on Twitter — which has included tons of of job cuts, clashes with advertisers and an overhaul of the corporate’s account verification policies.

Half of Twitter’s top 100 advertisers starting from AT&T to Wells Fargo have seemingly stopped promoting on Twitter, based on Media Matters for America.

outside Twitter office building Musk took Twitter private after paying $54.20 a share for the positioning.Liz Hafalia/San Francisco Chronicle via AP

Odeon Capital Group Analyst Dick Bove told The Post that Morgan Stanley has not commented yet on the loan and can likely be asked about it on the earnings call.

He said Morgan Stanley has been very bullish on tech, and that’s the reason they’d make what has turned out to be this dangerous loan.

Bove believes Morgan Stanley ought to be focusing more attention on natural resources, manufacturing and defense.

“They’re positioned exactly incorrectly for where the economy is moving,” Bove said.

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