Yesterday, Wall Street banks unloaded £4.41 billion of debt holdings in Elon Musk's X amid strong investor interest as advertisers return to the social media platform and Musk's popularity grows in the political sphere.
Banks sold £4.41 billion of debt holdings in X that had been stuck since 2022, when they enabled Musk to take over the company, formerly Twitter, for £35.3 billion. Investors bought the loans at £0.78 ($0.97) on the dollar, up from a sale pegged at £2.4 billion a few days ago for £0.76 ($0.95) on the dollar due to a surge in investor demand on X's improving financials.
The floating-rate debts carry an interest rate close to 11%. Banks like Morgan Stanley, Bank of America and Barclays issued those loans to Musk.
Investors Bet Big On Musk As Advertisers Come Back To X
Musk's appointment as the chief of the US Department of Government Efficiency and his proximity to President Donald Trump has led investors to bet on his companies, including Tesla, which sent share prices soaring in 2024 despite suffering its worst sales year.
Banks usually sell loans like X's soon after deal closure, but unloading them was difficult due to an advertiser exodus. Major advertisers started to avoid the platform in 2023 when Musk reposted antisemitic posts and even commented on one: "You have said the actual truth."
However, some major advertisers, such as Bob Iger's Disney, resumed ads on the platform in 2024 despite Musk indicating he didn't care if they left. Meanwhile, Amazon is increasing its spending on X, while Apple recently discussed testing ads on the social networking platform. Apple pulled all its ad dollars from X in 2023-end.
Investors Lured By X's Improving Financials
On 31st January, bankers at Morgan Stanley and X CEO Linda Yaccarino presented the company's rebounding financials during a meeting with potential investors, who had been in touch with the banks and expressed interest in buying the recently offloaded loans.
The debt was pitched to potential buyers based on the company's financials, including an almost £962.84 million adjusted EBITDA in 2024. Approximately £320.94 million of EBITDA was from £561.65 million of revenue in the final quarter of the year, marking a jump from the previous two quarters.
Bloomberg highlighted that although the full-year 2024 EBITDA figures are the same as before Musk took over the company, the latest figures come with a considerable line of adjustments that boost the company's outlook.
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