By Shankar Ramakrishnan and Echo Wang
(Reuters) -Elon Musk’s political ascendancy has some Wall Street banks hoping they may soon be able to offload $13 billion of debt that backed the billionaire’s purchase of the social media platform X, three banking sources said.
Some of the lenders in the consortium, which included Morgan Stanley and Bank of America, think Musk’s emergence as a close aide to Republican President-elect Donald Trump could boost the prospects of X, previously known as Twitter, the sources said. If that were to happen, it would allow them to sell the debt without having to take a massive loss on the deal, the sources said.
Musk, X, Morgan Stanley and Bank of America did not immediately respond to a request for comment.
Banks typically sell such loans to investors soon after the deal is done, but in the case of X, which Musk bought for $44 billion in 2022, they have been stuck holding the debt. Musk’s sweeping changes to the platform, including laying off many people who worked to moderate content, and one of his posts on X, scared away advertisers and hit revenues. That reduced the value of the debt, as the risk of default increased.
In recent months, one of the sources said, some banks expected X had seen increased traffic as users flocked to the platform around big events like the U.S. elections. Trump, whose account on the platform was restored by Musk after the previous management banned him in January 2021, has been regularly posting on it.
The banking sources said they wanted to see whether that and a robust U.S. economy would translate to increased revenues for the platform.
Analysts have said Musk’s ties with Trump — who put him in charge of a new government department on efficiency — could benefit the entrepreneur’s various business ventures, which range from Tesla electric vehicles to SpaceX rockets. Tesla’s market value surpassed $1 trillion for the first time in two years in the days after the election results.
The Trump campaign did not immediately respond to a request for comment.
DEBT VALUE
It is unclear to what extent Musk’s close connection in the new administration could help revive X’s business. One of the sources said it could also further divide its user base. Newer platforms like Bluesky and Meta’s Threads have been benefiting from a user exodus from X since the election.
U.S. web traffic on X reached its highest point this year on election day with 42.3 million visits, which climbed another 10% to 46.5 million visits the day after the election, according to data from web analytics company Similarweb. But by the weekend, X’s web traffic tapered off to more normal levels, Similarweb said. The data firm said 115,000 web users in the U.S. deactivated their X account on Nov. 6, higher than any other day since Musk took over the platform.