The big banks and investors who helped Elon Musk complete his $44 billion Twitter takeover are taking a shower of their equity stakes and loans to the bleeding social network, in keeping with financial documents and sources interviewed by The Post.
Fidelity Investments has been forced to lower its initial stake 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 Twitter’s share price markdown could also be even steeper in point of fact, with multiple sources noting that the $13 billion Musk borrowed from Twitter to fund the buyout would not 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 underwrite a $13 billion loan for the October 27 deal. However, Morgan Stanley didn’t attempt to syndicate the loan because there may be a really limited marketplace for the paper and it’s deep underwater, two well-placed sources say.
“No one touches this debt until a latest CEO is hired and folks get clarity on revenue,” one source said.
“I do not think they might sell it for 50 cents on the dollar in the event that they tried,” said a second source who’s one among the larger buyers of secondary loans.
These loans needs to be slashed by 70% of their value, in keeping with one source that constructs leveraged loans and is following the case. This estimate is way more drastic than the 20% discount. Reuters reported that Morgan Stanley would adopt to reflect the present value loan when the bank reports a profit on January 17.
Morgan Stanley declined to comment when contacted by The Post on Tuesday.
The interest on the loans is about $1.3 billion a yr, The Post previously reported. Debt is superior to equity within the capital structure.
Musk took Twitter private after paying $54.20 for a share of the location, and isn’t obligated to share financial information with anyone apart from his banks. There is concept that Twitter’s revenue will reach $1 billion over the following 12 months after reaching $5 billion in 2021, one source said.
Musk gave mixed signals in regards to the current value of Twitter. In early December, the tech mogul said it desired to sell Twitter shares at the identical price it paid, indicating that its value had not gone down. However, on December 18, he tweeted that Twitter “has been on a straight path to bankruptcy since May.”
Lenders consider the potential of bankruptcy is another excuse not to purchase debt on Twitter, a source.
“Who Wants to Go Against Musk in Restructuring?” one lender said.
Since taking on Twitter, Musk has passed through a big scrutiny that has included a whole bunch of layoffs, clashes with advertisers, and a review of the corporate’s account verification policies.
According to Media Matters for America, half of the highest 100 Twitter advertisers, from AT&T to Wells Fargo, have apparently stopped promoting on Twitter.
Odeon Capital Group analyst Dick Bove told The Post that Morgan Stanley has yet to comment on the loan and can likely be asked about it in the course of the earnings call.
He said that Morgan Stanley was very stubborn about technology and subsequently they might earn what turned out to be a dangerous loan.
Bove believes Morgan Stanley should focus more on natural resources, manufacturing and defense.
“They’re positioned precisely the unsuitable way around where the economy is moving,” Bove said.