Banks are preparing to sell debt tied to Elon Musk’s social media platform, X, at a significant discount. Musk acquired the platform in 2022 for US$44 billion, with US$13 billion financed through loans. Leading the effort is Morgan Stanley, which plans to sell senior debt for 90 to 95 cents on the dollar, according to a report by The Wall Street Journal.
The challenges of selling X’s debt
Typically, banks avoid holding debt for extended periods, but volatile market conditions often disrupt such plans. Since Musk’s takeover, X has experienced significant challenges, including advertiser withdrawals due to concerns about extreme content and its potential impact on brand safety. These concerns have made it harder for X to maintain its financial stability.
According to insiders cited by The Wall Street Journal, X’s financial position is showing signs of improvement. However, in a January email to staff, Musk admitted that the platform’s user growth was stagnant, its revenue unimpressive, and it was only breaking even. Musk emphasised X’s influence despite these struggles, calling it a powerful platform for shaping national conversations and outcomes.
Advertisers remain hesitant
While Musk’s vision for X centres on its cultural and political influence, this does not seem enough to reassure advertisers. The departure of major brands following Musk’s acquisition has been a persistent issue, and the platform has struggled to regain their trust. Advertisers remain wary of the content on X, fearing it could tarnish their reputations.
Another controversial Musk incident may have further complicated X’s relationship with advertisers. At President Trump’s inaugural celebration, Musk made a gesture many interpreted as a fascist salute. Although it sparked debate at the time, such actions can create additional uncertainty for big brands when deciding where to allocate their advertising budgets.
Wall Street’s plans to sell X’s debt at a discount reflect these challenges and the platform’s uncertain future. While improvements in financial performance might help, rebuilding advertiser confidence will likely be crucial to securing X’s long-term stability.
