Wall Street banks prepare to sell up to $3B in X loans next week

https://www.reuters.com/technology/wall-street-banks-set-sell-billions-dollars-x-loans-wsj-reports-2025-01-24/

by x11antiek • 1 year ago

109 109 1 year ago

churchill4• 1 year ago

I wonder who's going to be buying, since they're selling at just a 5% discount. Since the purchase, Twitter has lost 85% to 90% of its revenues. So, I think the discount doesn't factor in just how much value X has lost. And, unless Musk buys back the debt, I don't see any takers lining up.

Judging by how much stock Elon had to sell, plus the loans/equity raised for the initial purchase, it feels like an all-round bad decision.

From another perspective, judging by how X played a huge role in the 2024 election & Elon's new role as First Friend, maybe his rapidly improving fortune factors into the calculus.

jncfhnb2• 1 year ago

It’s not particularly clear that X played a significant role

api• 1 year ago

I doubt it changed anyone’s mind. It’s just a rallying point for one side at this point.

jfengel• 1 year ago

Probably not. But it did raise Musk's prominence in the political realm, and might have been a crucial step towards the significant role that he played himself.

That wasn't the plan, to be sure. But whatever the plan was originally, it is now secondary.

mminer2372• 1 year ago

Probably not in Trump winning, but I can't imagine Musk having so much sway over Trump otherwise.

raverbashing• 1 year ago

Pretty much https://x.com/peterjukes/status/1883109889452437607?t=EmMG7K...

breatheoften• 1 year ago

I'm sure it factors into the calculus of the sellers -- best chance they have that there might exist an irrational buyer onto whom they can unload the losses is likely now ...

nine_k• 1 year ago

"$34B is a steep price to kill Twitter, but maybe it's worth it", a somebody wrote back in the day.

Apparently it sort of was worth it for Musk, but it cost him, and is going to cost further down the line.

xracy• 1 year ago

I mean, this might've made sense if he was killing it fast... but He's killing it with enough time for it to come back as bluesky.

Theodores• 1 year ago

He bought himself into the White House as a tech-bro Rasputin, probably the most paid for that level of influence, so we can expect him to get his money's worth.

bdangubic4• 1 year ago

he bought an office in the white house which he already turned into much more than what he invested in X with 4 more years to come…

tomjen3• 1 year ago

Does the value of a company matter for their bonds?

As I understand it, Twitter is breaking even given all expenses, which means that they should not have problems paying back their debt. In which case, the investment seems solid. If we were talking stocks, I would understand it.

ben_w• 1 year ago

As I understand it, Twitter is breaking even given all expenses

What I've heard is the opposite, that the cost of servicing interest on the loans they now have exceeds 100% of their total revenue.

(Not profit, revenue: even if they cut absolutely every other cost to zero they'd still be losing money).

jacobjjacob• 1 year ago

If they aren’t growing, and barely breaking even, the chances of going into the red are not low. Idk if the bonds have a rating but I don’t think X would have a AAA rating right now?

If it’s really worth 95%, it’s only held up by the political situation and investors’ general Elon bubble.

wbl2• 1 year ago

Debt is short a put. The shareholders can walk away from a default and you are stuck with whatever the company is worth. So the more enterprise value vs the debt, the safer.

HDThoreaun• 1 year ago

These loans have nothing to do with twitters value though. The question is will musk pay the debt off, not whether twitter will become more valuable. Right after the deal was done investors wondered musk might just let the loans default and give twitter to his creditors, but now that it seems so important to him politically he is less likely to do that.

bloopernova5• 1 year ago

I am less sure that x means anything to musk. I could absolutely see him shut it down in a fit of anger.

Although that's based on a very distant view of his actions, maybe in private he's 100% on board.

FollowingTheDao• 1 year ago

-These loans have nothing to do with twitters value though.

Of course it does! Why do you think Elon was complaining about the article so much?

aprilthird20212• 1 year ago

Well, will it still be valuable at bond maturity, the main question

exe342• 1 year ago

it feels like an all-round bad decision.

Eh, he bought the White House for $40bn. I say that's a very good purchase, given how he can now leverage it to get better deals for his business. E.g. Greenland for resources to make batteries.

bloopernova5• 1 year ago

I had read* that his interest in Ukraine and putin was to gain a share of Ukrainian mineral wealth. If that rumour was true, then yeah I could see him advocating for an invasion of Greenland. Although, didn't the Greenland SNAFU start with trump?

* And don't have a link to whatever it was, so take with a cyber truck full of salt!

aprilthird20212• 1 year ago

Many other foreign lobbies and interest groups buy influence in the White House (in all administrations) for substantially less

MuffinFlavored• 1 year ago

Since the purchase, Twitter has lost 85% to 90% of its revenues.

Source? Is this true?

smallerize• 1 year ago

84% as of August, according to documents obtained by the NYT. https://finance.yahoo.com/news/twitters-revenue-collapses-84...

bloopernova5• 1 year ago

Not sure about those figures, but WSJ ran a story recently about a musk email saying x was barely breaking even:

https://archive.ph/cCOlA

https://www.wsj.com/finance/banking/wall-street-banks-prepar...

aucisson_masque• 1 year ago

From another perspective, judging by how X played a huge role in the 2024 election & Elon's new role as First Friend, maybe his rapidly improving fortune factors into the calculus.

That's it, it's even said in the article. Everyone know that Elon musk in the us government and him being buddy buddy with Trump is like inviting a wolf into a lamb's den.

notjoemama• 1 year ago

Twitter has lost 85% to 90% of its revenues.

Do you mean from when Musk purchased it?

https://www.businessofapps.com/data/twitter-statistics/

Looking at the revenue growth, does anyone know why it increased in value to the degree it did leading up to its sale? I recall there was some discussion around the amount of bots (not the existence, the degree).

Pre-sale:

https://www.pewresearch.org/internet/2018/04/09/bots-in-the-...

https://www.pewresearch.org/short-reads/2018/04/19/qa-how-pe...

During the process:

https://www.cpomagazine.com/cyber-security/we-checked-elon-m...

I wonder to what degree bots are still influence the platform. For that matter, it would be nice to know how bad the problem is on Reddit.

churchill4• 1 year ago

I don't understand to what extent bots impacted Twitter's revenue or if at all that happened, after all, that only came up as one of a few tactics Elon tried using to get out of buying Twitter.

Thing is, as a public company, Twitter's revenues were public, amounting to $5.229B/yr (i.e., up to the sale). And, the New York Times reported they were doing $114M/quarter in early 2024. Annualized, that's $456M per year. So, an 87% revenue decline if we compare X's self-reported revenues against Twitter's last public disclosures before being acquired.

rsynnott6• 1 year ago

They seem to be only selling senior debt, which is _somewhat_ less risky (when a company is wound up, senior debt gets paid first) and hanging onto the junior debt.

auc• 1 year ago

Anyone buying at a 5% discount is torching money

jgalt212• 1 year ago

Maybe so, but I think the loans being sold have extra levels of credit protection and the banks are keeping subordinated tranches.

bdangubic4• 1 year ago

can you explain this in with little more detail for us not familiar with this? :)

Hizonner• 1 year ago

I'll give them $1.98.

BJones12• 1 year ago

Bonds selling below par is common, so this article with very few details doesn't say much.

IIRC Twitter LBO bonds were getting an average of 9.6% YTM when raised, and had maturities from 2027 to 2030. Selling at 90-95 means an increase in the yield of about 2% (napkin math says 1%-5%).

Alive-in-20252• 1 year ago

So what does this mean for the value, not sure how to put this together. Would be useful to put it all together into something like:

Original debt of twitter buyout lost x%, with this latest sales it down overall to y%?

paulproteus• 1 year ago

I wonder if Musk will buy the loans.

badgersnake• 1 year ago

Why would he toss even more money onto the Twitter bonfire when there’s no need?

covercash• 1 year ago

Why does he do a lot of the things he does? Ketamine.

hn_throwaway_99• 1 year ago

There is a need - Twitter is now an excellent platform for propaganda and manufacturing consent. If Twitter defaults on the loans, my assumption is the creditors take control, and Musk gets a ton of value from being in control of Twitter.

Ekaros2• 1 year ago

To not lose all of it. Musk is shareholders and while shareholders make the decisions(or at least decide who do) they are also last to get any value when things go to receivership.

more_corn• 1 year ago

Playing devils advocate here: 1) Buy $44B asset with investor money 2) Tank value of asset by 90% 3) Buy debt at 90% discount 4) ??? 5) Profit

NotYourLawyer• 1 year ago

I’d pay no more than 30 cents on the dollar.

sitkack• 1 year ago

Is it public who buys these loans? Can we track them?

hugoromano• 1 year ago

I'm skeptical about Elon Musk being the richest person on the planet. My mantra these days? 'Show me the money!' If Wall Street banks are preparing to sell $3B in X loans, maybe he should buy them back—with real cash this time.

gexla2• 1 year ago

Who cares if he's the richest? Why should he show this to you? How do you know that he should buy these loans as opposed to this being a normal process working out the same as it always does?

Maybe you should collapse the number of items you have an interest in formulating an opinion on so that you can give more attention to those things that you can provide something that adds to the discussion.

Ekaros2• 1 year ago

Am I thinking right but say the coupon is 9,6. And now they are selling it at 10% loss. But they got this coupon for 2 years over say ~4 of more safe loans. They are not even now losing too much and certainly not at 5?

kmac_• 1 year ago

Maybe they are just rebalancing not-too-well-rated or prospective assets for safety reasons.

Animats2• 1 year ago

Morgan Stanley and others, such as Bank of America and Barclays, lent Musk money to complete his $44 billion buyout of X, then known as Twitter, in 2022.

Hm. So who owes the debt? What's the collateral? Supposedly Musk bought Twitter personally, but this looks like a leveraged buyout in trouble.

The banks involved had a "sell-down letter", an agreement between the lenders that any sell-off gave the other lenders a right to participate at the same price. That expired ten days ago.[1] The interest charge is about $1.5bn/year now. A big question is how long those loans run at the old interest rate. Rates are higher now. Total revenue from X is said to be about $1bn/year, not that anybody outside really knows.

[1] https://finance.yahoo.com/news/exclusive-banks-funded-elon-m...

isoprophlex• 1 year ago

So, 500m a year to whisper sweet nothings into the minds of a significant % of the world population. Or brainwashing them, whatever you like. I think it's not a bad price, someone surely feels theyre getting their moneys worth.

Animats2• 1 year ago

$1bn is revenue, not income. Income is much less.

grajaganDev• 1 year ago

It is a good deal if you want to influence millions of bots.

827a• 1 year ago

Twitter/X is entirely a emperor has no clothes situation.

During Musk's acquisition, Twitter officially stated that around 5% of the platform was bots; Musk tried to back out of the deal because he believed the methodology used to get to that number to be bad. On one occasion he stated an estimate of 20%, but said it could be "much higher". Anyone who spends any significant time on X, post acquisition especially, is likely to agree with the "much higher" part of that.

(Remember this: Any time he's on Joe Rogan or talking to anyone who thanks him for his "service to America" by purchasing Twitter: Elon Musk did not want to buy Twitter. He realized it was a bad purchase very quickly, and tried to weasel out of it multiple times. He is a low-intellect coward who makes bad decisions, but he does surround himself with people who can clean up the repercussions of his bad decisions.)

Estimates of how many total active users (humans + bots) are on X vary wildly; Musk has said "600M monthly active" as of May 2024; but as of Oct 2024 SOAX estimated something more like 335M, with 105M in the United States [1]. Depending on what numbers you believe and what percentage you believe to be bots, this means there's anywhere between 10M-80M American Humans logging in to X on a monthly basis. The disparity between this number and the other major social networks is harrowing [2], as is the direction their user count [3] and advertiser count [4] is heading.

The xAI ambitions are also, put simply, bad decision making; which should come as no surprise given Elon Musk is not good at making decisions. AI is commoditized, and the majority of value in that space right now is being created in enterprise B2B, not B2C. xAI has no B2B plan; the combination of ChatGPT, Gemini, and Apple Intelligence rule the B2C zeitgeist, and there's literally nothing differentiating xAI to justify its high price tag. xAI has no integration with the hardware people are buying (until they start shipping it to Teslas; that's when you'll know its over for Musk); nor do they really have control over the software.

The only shred of value X has left is Elon Musk's personal connection to the President; yet he made it 3 days into the new Presidency before publicly ripping apart a major policy objective of the Trump administration; one that is well-aligned with his own business interests, because of a personal feud with Altman [5]. It seems very likely to me that Musk will self-sabotage that relationship within the first year. If the new purchasers of this debt believe they can use it to control him and leverage that relationship, they should be reminded that Tesla tried for years to get control of his Twitter shit-posting, and no one could. He cannot be controlled, and he has a demonstrated and catalogued history of engaging in public self-sabotaging behavior despite good and friendly counsel.

X's bot problem isn't only an issue for its advertisers and revenue; human, American ears listening to the things Musk posts is why the platform has value for Trump.

[1] https://soax.com/research/twitter-active-users?utm_source=ch...

[2] https://datareportal.com/social-media-users

[3] https://mashable.com/article/elon-musk-x-declining-user-base...

[4] https://www.cnn.com/2024/09/05/business/advertisers-x-withdr...

[5] https://fortune.com/2025/01/24/donald-trump-sam-altman-opena...

gexla2• 1 year ago

I thought this was all normal? The only issue I have seen is that the banks couldn't do this sooner?

https://www.wsj.com/tech/elon-musks-twitter-takeover-is-now-...

skc• 1 year ago

Whatever. I think X has been Musk's most spectacularly succesful investment.

44 billion was a pretty small price to pay for the ultimate propaganda bullhorn.

breadwinner4• 1 year ago

He has failed in his fiduciary duty to other investors. If your goal is to build a propaganda bullhorn as opposed to maximizing returns for your investors then don't take money from other investors or at least warn them.

OnlineGladiator4• 1 year ago

The most powerful country on the planet has been taken over by oligarchs and your concern is for the investors? As someone who regularly invests in high risk stocks, you'd have to be a complete fucking idiot not to see this coming.

The investors backed Elon Musk, a man with a long history of picking fights with the SEC, breaking labor laws, and being a manchild - why would they expect something different?

ChrisArchitect• 1 year ago

Elon Musk email to X staff: 'we're barely breaking even'

https://news.ycombinator.com/item?id=42818026

Wall Street banks prepare to sell up to $3B in X loans next week

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