Elon Musk’s purchase of Twitter, now known as X, might be the biggest financial blunder he has ever made.
The deal, which was finalized on October 27, 2022, came after a chaotic negotiation process that ended with a lawsuit forcing Elon to follow through with the acquisition.
The structure and timing of everything have led many to call it one of the worst leveraged buyouts in recent memory.
Debt and revenue problems
Elon used $31 billion of his own money to buy Twitter, with the rest borrowed from several banks, and it has been nothing but trouble.
The interest alone is expected to be over $1 billion per year. That’s a massive burden, especially when Twitter’s projected revenue in the US for 2024 is only around $600 million.
This means that the platform can’t even cover its debt obligations.
The strain of this debt has also affected Tesla. You see, his shareholders are worried that Elon might have to sell off his Tesla shares—potentially between $1 billion to $2 billion—to cover Twitter’s losses.
This has added pressure on TSLA. The board is not happy with Elon at all.
Fallout from the deal
The banks that helped Elon finance the Twitter purchase are in trouble now. They haven’t been able to sell off the debt as planned, leaving them stuck with a bad deal.
Barclays, for one, saw its Mergers and Acquisitions team hit hard, with a 40% cut in annual compensation.
This financial fallout has led to a mass exit of managing directors from the bank. The Securities and Exchange Commission (SEC) is also chasing Elon over his conduct when buying Twitter.
The regulator is looking into whether Elon broke the law when he didn’t properly disclose his stock purchases and whether he misled the public with his statements about the deal.
Earlier this year, a judge ordered Elon to testify as part of this investigation. The SEC claims that the billionaire has been dodging his testimony obligations.
They allege that he skipped a scheduled session on September 10, saying he had to be at a SpaceX launch on the East Coast, even though he knew about the launch days ahead.
This last-minute change cost the SEC thousands of dollars, and they’re pissed. So they’re asking the court for sanctions against Elon if he doesn’t show up for the new testimony date in October.
Lofty goals, harsh realities
Elon has this grand plan to transform Twitter into an “everything app.” He wants to make it a platform that could do everything. Social media, payments, and more.
But this vision hasn’t translated into financial success.
Elon claimed he bought Twitter to protect free speech, criticizing the previous management for not doing enough in that area.
He once said:
“I didn’t do it to make more money. I did it to try to help humanity, whom I love.”
He wanted X to be a “digital town square” where everyone could speak freely without fear of being censored, while still maintaining some form of accountability.
But Elon also had business motives. He saw potential in Twitter, saying:
“I think it’s an asset that has just sort of languished for a long time but has incredible potential.”
He thought he could turn things around, but that hasn’t happened. The platform has continued to struggle, and now, who knows if Elon’s vision will ever be realized?
There’s a fine line between optimism and delusion, and right now, it seems like Elon is toeing that line.
X has also been a way for him to regain control over his public image.
His behavior on social media has been controversial, to say the least, and buying Twitter was a way to create an environment that suits his communication style.
The SEC’s never-ending battle
Back in 2018, the SEC sued Elon for falsely tweeting that he had “funding secured” to take Tesla private.
That ended with a settlement, but the bad blood has continued to this day. The latest filing said:
“Despite this advance knowledge, Elon did not notify the SEC of his intent to attend the launch until three hours before his testimony was to begin, and after the SEC spent thousands of dollars to fly three attorneys to Los Angeles.”
In the end, Elon’s Twitter acquisition has been a colossal mess, financially and legally. He’s facing massive debt, falling revenue, and increasing scrutiny from regulators.
And as things stand, it doesn’t look like his vision for X will save the day. Instead, it might be his downfall.
