Finally, Morgan Stanley was able to shed a giant chunk of the debt it took on in Elon Musk’s $44 billion takeover of Twitter, now renamed X.
The bank, along with its lending partners, sold off $5.5 billion worth of loans. That’s a big deal; it was tough to find anyone willing to buy this debt in the past. It follows a $1 billion sale last month and shows investors are starting to make bets on Musk’s leadership of X, even with its ongoing financial struggles.
Who bought the debt?
In came a heavyweight consortium of investors including Citadel and Apollo Global Management. The banks had planned on selling about $3 billion, but demand proved strong, so they sold $5.5 billion. The buyers took home the loans at 97 cents on the dollar, versus 90-95 cents many had expected; at an 11% yield, this is a pretty good return for risk-tolerant investors.
Why the Sudden Interest?
Investor confidence in X grows for the following reasons:
- Musk’s Political Influence: Musk’s political influence is relevant, too, because of his associations with Donald Trump, and that puts him probably as the most politically relevant tech executive out there. For some investors, this could be an indication that X might be in a far stronger position going forward.
- Advertising Recovery: Major brands pulled their ads from X amid controversy, but are slowly returning to help the revenue stabilize.
- Business Model Shift by X: Musk has aggressively pushed subscription revenue along with new monetization strategies that can drive profitability for the long run.
The Bigger Picture
The banks had struggled to offload the debt since Elon Musk’s acquisition. X had been facing user stagnation, revenue dips, and heavy cost-cutting that had put its future in doubt. However, this sale by Morgan Stanley suggests a Wall Street reevaluation of its risk appetite in Elon Musk-led ventures.
Selling that debt doesn’t get X out of the woods, as Musk himself is on record to admit that the platform is merely breaking even with challenges such as content moderation, user stickiness, and competition from the likes of Threads and Bluesky. Morgan Stanley and its lending partners still hold billions of Twitter/X debt, but this successful sale could make way for more sell-offs in the future.
For now, investors will be keenly watching whether X, under Musk’s helm, could turn its financial prospects around. But for now, the market has spoken: Elon Musk and X still have believers.
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