Billionaire Elon Musk completed a $44 billion acquisition of social media platform X, formerly known as Twitter, in October 2022.
The acquisition included the backing of several investors and multiple financial institutions providing financing for the deal.
What Happened: Musk acquired Twitter after taking a stake in the company and previously pushing for changes at the company.
Musk financed the deal through person funds. He also sold a portion of his stock in electric vehicle maker Tesla (NASDAQ: TSLA). Other investors like Fidelity, Ark Invest, Baron Funds and Jack Dorsey also helped Musk finance the deal.
Several banks were involved in the acquisition and they reportedly want to refinance their debt in the company over a year later, according to a new report from Bloomberg.
A group of banks led by Morgan Stanley (NYSE: MS) seeks to refinance around $12.5 billion in debt related to the acquisition. Morgan Stanley was the largest bank lender on the acquisition, covering around one-fourth of the debt.
The banking giant reported $876 million in mark-to-market losses in 2022 due to corporate loans it carried.
The banks have agreed to not sell their debt in the company until X is more financially sound.
The banks have held talks with Musk before the discussions are said to have cooled off in early 2024.
Why It's Important: One of the main concerns is to make the debt less risky for the banks.
Fidelity, an X investor via the Fidelity Blue Chip Growth Fund, has both cut and raised the valuation of X. The current carrying valuation stands at around $14.1 billion.
X also faces a boycott from several companies for advertisements over concerns of questionable posts on the social media platform.
Wedbush analyst Dan Ives predicted that Musk will seek to raise additional capital for X in 2024. The additional money could be essential to transforming the social media platform into a super-app concept akin to Tencent's WeChat.
Additional funding could lower the risk of Musk needing to sell Tesla shares. However, it could prove difficult given the lowered carrying valuations of X and the struggles to refinance the debt.