Bankers are preparing to sell off the debt that financed Elon Musk's acquisition of a prominent social network, which he purchased for $44 million in 2022. The acquisition included $13 billion in financing. Morgan Stanley leads this debt sale, with plans to sell it at a discount, between 90 and 95 cents on the dollar. The social network, however, faces challenges, including stagnant user growth, unimpressive revenue, and barely breaking even, which complicates the debt sale efforts.
The social network has seen volatility since Musk's takeover. Advertisers have begun to retreat due to concerns over extreme content on the platform that could harm their brands. This situation is further exacerbated by a gesture Musk made at President Trump's inaugural celebration, perceived by some as a fascist salute, presenting additional challenges for big brands considering advertising on the platform.
Elon Musk himself acknowledged the platform's struggles, stating:
"Our user growth is stagnant, revenue is unimpressive, and we’re barely breaking even." – Elon Musk
Typically, bankers aim to avoid holding debt for extended periods, but the volatility following Musk's acquisition has disrupted standard procedures. The sale of the debt at a discount reflects the challenges and uncertainties surrounding the social network's future performance and its impact on national conversations.
Morgan Stanley's commitment to leading the debt sale highlights the urgency to offload this financial burden. However, the market's reception will depend heavily on the social network's ability to turn its fortunes around and regain advertiser trust. The platform's ability to "shape national conversations and outcomes," according to Musk, underscores its potential value despite current setbacks.
Leave a Reply