Report: Twitter’s Value Has Plunged Since Elon Musk’s Takeover

A recent report claims that following the takeover of Twitter by Elon Musk, the social media platform’s equity and value has plunged. Major financial players like Fidelity that invested in Musk’s takeover are taking a bath on their decision.

According to a report from the New York Post, large financial institutions and investors who assisted Elon Musk in acquiring Twitter for $44 billion in October 2020 are losing money on their equity holdings and loans to the social media platform. The initial stake that Fidelity Investments purchased in Twitter had to be written down from $19.66 million to $8.63 million, a decrease of more than 56%, according to the New York Post. Insiders claim that the markdown on Twitter’s equity value may actually be even greater.

According to numerous sources, Musk’s $13 billion loan against Twitter to pay for the acquisition would not even be worth 50 cents on the dollar if it were to be sold. This is a significant issue because Morgan Stanley oversaw a group of banks that provided the $13 billion loan for the deal that took place on October 27. These banks included Bank of America, Mitsubishi, BNP Paribas, Mizuho, and Societe Generale. However, according to two reliable sources, Morgan Stanley has not tried to syndicate the loan because there is a very small market for the paper and it is significantly underwater.

One of the sources stated, “No one is touching this debt until a new CEO is hired and people can get clarity on the revenues.” One of the major secondary loan buyers said, “I don’t think they could sell it at 50 cents on the dollar if they tried.” According to another source. It’s so bad that according to one source who structures leveraged loans and keeps track of the situation, these loans should be marked down by 70 percent of their value. This is a much more drastic estimate than the markdown of up to 20 percent that Reuters claimed Morgan Stanley will apply to reflect the loan’s present value when the bank releases its earnings on January 17. Regarding the loan, Morgan Stanley has made no comments.

The fact that interest on the loans is approximately $1.3 billion a year further increases the loan’s high risk. Furthermore, debt holders would receive payment before equity holders in the event of bankruptcy because debt is senior to equity in the capital structure. This has made the lenders think that another reason not to purchase Twitter debt is the potential for bankruptcy. Leders are not interested in opposing Elon Musk in a restructuring, a lender remarked.

Musk purchased Twitter for $54.20 per share, and he is now exempt from disclosure requirements outside of his banks. According to one of the sources, Twitter’s revenue is currently expected to drop to $1 billion over the course of the next 12 months from $5 billion in 2021. Regarding Twitter’s current value, Musk has given conflicting signals. The tech tycoon stated he was looking to sell Twitter stakes at the same price he paid in early December, showing that the company’s value had not decreased. However, on December 18, he stated in a tweet that Twitter “has been in the fast lane to bankruptcy since May.”

Since Musk took over, Twitter has come under intense scrutiny, eliminated thousands of jobs, engaged in disputes with advertisers, and changed the company’s account verification procedures.

According to Dick Bove, an analyst at Odeon Capital Group, Morgan Stanley has not yet commented on the loan but will likely be questioned about it on the earnings call. Bove thinks Morgan Stanley ought to pay more attention to manufacturing, defense, and natural resources. “They are positioned exactly incorrectly for where the economy is moving,” Bove said.

Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship. Follow him on Twitter @LucasNolan