[X’s mobile app page. Photo credit: Jaewoo Jung]

According to a review by The Wall Street Journal (WSJ), Elon Musk's acquisition of Twitter has resulted in the most financially problematic and unprofitable buyout financing deal for banks since the 2008 financial crisis.

The $13 billion in loans that Musk took out to finance his purchase of Twitter have remained on the balance sheets of the seven banks that provided the financing.

“X”, formerly known as Twitter, has performed poorly since the acquisition, which makes it difficult for the banks to sell off the debt.

Keeping the debt on their balance sheets is highly unusual for lenders as they aim to quickly sell off loans they have provided in order to remove them from their balance sheets and collect the associated fees from the debt sale.

The fact that the $13 billion in Twitter acquisition loans have remained stuck on the banks' books is an atypical phenomenon.

The banks that provided the $13 billion in financing for Musk's Twitter acquisition, including Morgan Stanley, Bank of America, and Barclays, have held onto this debt for 22 months.

The WSJ reports that this is the longest period that a major buyout financing deal has remained unsold by banks since the 2008 financial crisis.

The banks were willing to provide the $13 billion in financing for Musk's acquisition primarily because Musk, who remains one of the wealthiest individuals in the world, made the deal an opportunity too enticing for the banks to pass up.

However, the loans have largely been a burden on the banks' balance sheets as some lenders have significantly played down the value of this debt since Musk's acquisition of Twitter was completed at the end of 2022.

The banks have been unable to sell off the $13 billion in debt used to finance the acquisition without taking massive losses, primarily due to X's weak financial performance.

The loans used to finance the acquisition have remained unsold by the banks for a longer period than any other similar buyout financing deal since the 2008 financial crisis.

Meanwhile, X continues to struggle financially, despite the controversial changes and cost-cutting measures implemented by Elon Musk.

The company generated $1.48 billion in revenue during the first half of 2023, which represents a 40% decline compared to the same period a year earlier.

Under Musk's leadership, X has had a contentious relationship with its advertisers that account for the majority of the company's revenue.

Musk has responded aggressively to some advertisers abandoning the platform by cursing at them.

Additionally, the company has sued an advertising coalition and some of its members, alleging that they conspired to orchestrate a boycott of the platform that has cost X billions of dollars.

Given that X was valued at only $19 billion as of last year, it seems highly unlikely that the company's enterprise value will reach the $44 billion that Musk paid to acquire it initially.

Banks have indicated that they have had productive discussions with Musk and they expect to reach a favorable resolution regarding the repayment of the loans used to finance the Twitter acquisition.