Elon Musk’s $13 Billion Mistake: Wall Street Still Seeks Partnership

Elon Musk’s acquisition of Twitter for $43 billion has gained notoriety as Wall Street’s most regrettable deal since the 2008 financial crisis.

The banks that provided Musk with $13 billion to facilitate his buyout are now facing considerable challenges in offloading this debt. Revenues from Twitter are plummeting, leaving the lenders grappling with the repercussions.

Musk, who personally invested some of the remaining $30 billion needed for the acquisition alongside contributions from prominent figures like Oracle founder Larry Ellison and Marc Andreessen, is not experiencing the ramifications alone. The lenders, including major names like Morgan Stanley and Bank of America, express significant regret over their investment as they struggle to sell off the related debt.

Efforts to resell the debt are hindered by Twitter’s declining revenue and Musk’s tumultuous relationships with advertisers, which have included both confrontations and legal disputes. This situation has become dire enough that it is affecting bank employees’ bonuses, much to the amusement of observers.

However, a critical distinction arises when comparing Musk to regular investors. If an everyday individual were to make a poor business decision that resulted in a 50% revenue drop, repaying the debt would present a serious challenge. This often leads to dire consequences, such as losing assets to the banks.

In contrast, Musk—who holds the title of the richest person in the world—has been consistently meeting his payment obligations, which total approximately $1.5 billion annually.

According to The Wall Street Journal, the banks that lent Musk $13 billion do not regret their involvement; rather, they are eager to continue their partnership with him. Their aim is to remain strategically positioned to collaborate with him on his various ventures, which include electric vehicle manufacturer Tesla, Neuralink, and xAI.

Many financiers view a potential initial public offering (IPO) of Musk’s SpaceX or his Starlink satellite enterprise as an opportunity not to be missed. Their initial motivation for lending Musk such a substantial amount was driven by the prospect of being involved in his broader business endeavors rather than just a favorable outlook on Twitter.

Even after witnessing Musk’s unpredictable and often destructive decision-making, these banks are still keen on maintaining their association with him.

This eagerness is not unfounded. For example, SpaceX is estimated to be worth around $175 billion, a valuation that could invite debate over its authenticity. Nevertheless, should Musk decide to go public with SpaceX, it would likely become a significant IPO, with banks scrambling to secure their share.

Thus, while the public may find humor in Musk’s missteps, the financiers backing him remain serious about their commitment to his endeavors.

Source: Business Insider