Big banks and investors that helped Elon Musk complete his $44 billion takeover of Twitter are taking a shower on their equity stakes and loans to the money-bleeding social media site, in keeping with financial filings and sources interviewed by The Post.
Fidelity Investments has been forced to put in writing down the initial stake it took in Twitter — valued at $19.66 million last October — to $8.63 million, in keeping with a recent securities filing by Fidelity.
But insiders say the markdown on Twitter’s equity value could possibly be even steeper in point of fact, with multiple sources noting that the $13 billion Musk borrowed against Twitter to fund the buyout wouldn’t even sell for 50 cents on the dollar.
Morgan Stanley led a bunch that included Bank of America, Mitsubishi, BNP Paribas, Mizuho and Societe Generale that underwrote the $13 billion loan for the Oct. 27 deal. Nonetheless, Morgan Stanley has not tried to syndicate the loan because there may be a really limited marketplace for the paper and it’s well underwater, two well-placed sources said.
“Nobody is touching this debt until a latest CEO is hired and other people can get clarity on the revenues,” one in all the sources said.
“I don’t think they will sell it at 50 cents on the dollar in the event that they tried,” said the second source, who’s one in all the larger buyers of secondary loans.
These loans must be marked down by 70% of their value, in keeping with one source who structures leveraged loans and is following the matter. That estimate is way more drastic than the markdown of as much as 20% that Reuters reported Morgan Stanley will take to reflect the current value of the loan when the bank reports earnings on Jan. 17.
Morgan Stanley refused to comment when contacted by The Post on Tuesday.
Elon Musk took the reins on Twitter in a $44 billion takeover last yr.AP
Interest on the loans is about $1.3 billion a yr, The Post previously reported. Debt is senior to equity within the capital structure.
Musk took Twitter private after paying $54.20 a share for the positioning and isn’t required to share financials with anyone apart from his banks. There is theory Twitter’s revenue is now on pace over the subsequent 12 months to be $1 billion after reaching $5 billion in 2021, one in all the sources said.
Musk has given mixed signals on Twitter’s current value. In early December, the tech mogul said he was seeking to sell stakes in Twitter at the identical price he paid, indicating it had not dropped in value. Yet, he tweeted on Dec. 18 that Twitter “has been within the fast lane to bankruptcy since May.”
The lenders imagine the potential of bankruptcy is another excuse not to purchase Twitter debt, the source.
“Who desires to go against Musk in a restructuring?” one in all the lenders said.
Musk has faced significant scrutiny since taking on Twitter — which has included a whole bunch of job cuts, clashes with advertisers and an overhaul of the corporate’s account verification policies.
Half of Twitter’s top 100 advertisers starting from AT&T to Wells Fargo have seemingly stopped promoting on Twitter, in keeping with Media Matters for America.
Musk took Twitter private after paying $54.20 a share for the positioning.Liz Hafalia/San Francisco Chronicle via AP
Odeon Capital Group Analyst Dick Bove told The Post that Morgan Stanley has not commented yet on the loan and can likely be asked about it on the earnings call.
He said Morgan Stanley has been very bullish on tech, and that’s the reason they’d make what has turned out to be this dangerous loan.
Bove believes Morgan Stanley needs to be focusing more attention on natural resources, manufacturing and defense.
“They’re positioned exactly incorrectly for where the economy is moving,” Bove said.
