Wall Street banks on Wednesday sold billions of dollars in X debt holdings thanks to a surge in investor interest as the social network adds big advertisers and Elon Musk gains clout in Washington, according to a report.
Banks unloaded $5.5 billion of debt holdings in X that they have been stuck with since 2022, when they helped Musk acquire the site formerly known as Twitter for $44 billion, people familiar with the matter told The Wall Street Journal.
That was up from a sale pegged at $3 billion just days earlier, according to reports. Investors agreed to buy the loans at 97 cents on the dollar — up from plans to sell around $3 billion worth of debt holdings at 95 cents on the dollar — after seeing a spike in investor demand, according to the report.
The floating-rate debts carry an interest rate of approximately 11%, with borrowing costs above even the riskiest loans on Wall Street, the Journal said.
But investors have been eager to bet on Musk — sending Tesla stock soaring in 2024 even as it suffered its worst sales year — because of his proximity to President Trump and the White House, as chief of the Department of Government Efficiency.
A representative for X did not immediately respond to a request for comment.
Bankers usually sell such loans soon after the deal is closed, but offloading the X debt has been a challenge for banks who issued loans to Musk – including Morgan Stanley, Bank of America and Barclays – due to an advertiser exodus.
In 2023, major advertisers fled the platform after Musk reposted another user’s antisemitic post, adding: “You have said the actual truth.”
Some of these advertisers, including Bob Iger’s Disney, resumed ads on the platform last year, even after Musk had told companies that left X to “go f— yourself.”
Now, Amazon is ramping up its spending on X, and Apple, which pulled all of its ad dollars from X in late 2023, has had recent discussions on testing ads on the platform, according to the Journal.
On Friday, Morgan Stanley bankers and X’s chief executive, Linda Yaccarino, gave a presentation on X’s improving financials during a meeting with potential investors.
The debt was pitched to potential buyers with a set of financials showing about $1.2 billion of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in 2024, according to Bloomberg.
Those earnings include roughly $400 million of EBITDA on $710 million of revenue in the final three months of the year – an increase from the previous two quarters, according to the report.
The $1.2 billion figure is about the same as before Musk took over, but the latest financials come with a significant list of adjustments that improve the outlook, according to Bloomberg.
Investors had been contacting banks to express their interest in buying the debt, believing that X’s financials are bouncing back, the Journal previously reported.
In an email to staffers earlier this month, Musk acknowledged X’s growing influence.
Mark Zuckerberg, for example, recently followed in Musk’s footsteps when he axed fact-checking policies across Meta platforms.
But Musk said the company’s finances were still a problem.
“Our user growth is stagnant, revenue is unimpressive, and we’re barely breaking even,” he said in the email, which was obtained by the Journal.In a post on X.
Musk said the report is false and that the Journal “is lying.”
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