Wall Street Banks Seek to Unload Twitter Buyout Debt
Banks on Wall Street anticipate a week of recovery from losses incurred in Elon Musk's Twitter acquisition. Morgan Stanley (MS) and Bank of America (BAC) will approach investors shortly to dispose of portions of debt initially extended to Musk in 2022, sources reveal.
As per The Wall Street Journal, banks plan to offer senior portions of the debt, potentially recouping 90-95 cents per dollar. Bloomberg additionally reports that banks are incentivizing the sale with a stake in X's (formerly Twitter) interest in Musk's AI firm, xAI Corp.
Initially, major banks provided $13 billion in funding when Musk purchased Twitter for $44 billion in October 2022. However, the loans depreciated as X faced challenges, leaving banks unable to offload them without significant losses.
Banks may still profit from junior debt stakes if X's profitability improves. The current sale of senior debt relies on improved future prospects for X due to Musk's ties with President Donald Trump. Banks are also motivated to retain Musk, the world's wealthiest individual, as a client.
Musk's ownership of private companies with potential for future IPOs, such as SpaceX, contributes to his allure as a client.
X's valuation is further augmented by a previously undisclosed $6 billion stake in xAI Corp., as reported by Bloomberg on Monday. The renewed effort by banks to sell this debt reflects optimism among Wall Street dealmakers about the Trump administration's anticipated deregulation and corporate merger approvals.
The Trump administration is expected to repeal or revise proposed capital rules that could have hindered industry profits. Market conditions and economic stability are expected to foster increased dealmaking activity throughout the year, according to Morgan Stanley CEO Ted Pick.
Strong fourth-quarter profits in investment banking and trading have fueled a Wall Street revival, with gains observed at JPMorgan Chase (JPM), Goldman Sachs (GS), Citigroup (C), and Wells Fargo (WFC).