Big banks and investors that helped Elon Musk complete his $44 billion takeover of Twitter are taking a bath on their equity stakes and loans to the money-bleeding social media site, according to financial filings and sources interviewed by The Post.
Fidelity Investments has been forced to write down the initial stake it took in Twitter — valued at $19.66 million last October — to $8.63 million, according to a recent securities filing by Fidelity.
But insiders say the markdown on Twitter’s equity value could be even steeper in reality, with multiple sources noting that the $13 billion Musk borrowed against Twitter to fund the buyout would not even sell for 50 cents on the dollar.
Morgan Stanley led a group that included Bank of America, Mitsubishi, BNP Paribas, Mizuho and Societe Generale that underwrote the $13 billion loan for the Oct. 27 deal. However, Morgan Stanley has not tried to syndicate the loan because there is a very limited market for the paper and it is well underwater, two well-placed sources said.
“No one is touching this debt until a new CEO is hired and people can get clarity on the revenues,” one of the sources said.
“I don’t think they can sell it at 50 cents on the dollar if they tried,” said the second source, who is one of the larger buyers of secondary loans.
These loans ought to be marked down by 70% of their value, according to one source who structures leveraged loans and is following the matter. That estimate is far more drastic than the markdown of as much as 20% that Reuters reported Morgan Stanley will take to reflect the present value of the loan when the bank reports earnings on Jan. 17.
Morgan Stanley refused to comment when contacted by The Post on Tuesday.
Interest on the loans is about $1.3 billion a year, The Post previously reported. Debt is senior to equity in the capital structure.
Musk took Twitter private after paying $54.20 a share for the site and is not required to share financials with anyone other than his banks. There is speculation Twitter’s revenue is now on pace over the next 12 months to be $1 billion after reaching $5 billion in 2021, one of the sources said.
Musk has given mixed signals on Twitter’s current worth. In early December, the tech mogul said he was looking to sell stakes in Twitter at the same price he paid, indicating it had not dropped in value. Yet, he tweeted on Dec. 18 that Twitter “has been in the fast lane to bankruptcy since May.”
The lenders believe the possibility of bankruptcy is another reason not to buy Twitter debt, the source.
“Who wants to go against Musk in a restructuring?” one of the lenders said.
Musk has faced significant scrutiny since taking over Twitter — which has included hundreds of job cuts, clashes with advertisers and an overhaul of the company’s account verification policies.
Half of Twitter’s top 100 advertisers ranging from AT&T to Wells Fargo have seemingly stopped advertising on Twitter, according to Media Matters for America.
Odeon Capital Group Analyst Dick Bove told The Post that Morgan Stanley has not commented yet on the loan and will likely be asked about it on the earnings call.
He said Morgan Stanley has been very bullish on tech, and that is why they would make what has turned out to be this risky loan.
Bove believes Morgan Stanley should be focusing more attention on natural resources, manufacturing and defense.
“They are positioned exactly incorrectly for where the economy is moving,” Bove said.
[Written in collaboration with other media outlets with information from the following sources]
