Elon Musk may be on the brink of a remarkable financial turnaround for his acquisition of Twitter, now rebranded as X. Despite plummeting revenues and mounting debt, Musk's efforts to secure new funding and capitalize on emerging opportunities could lead to a recovery for the platform. This article explores the challenges Musk has faced, the strategies he's employing, and the potential implications for X's future.
Elon Musk might be on the verge of a Houdini-like escape from the financial predicament he encountered with his $44 billion acquisition of Twitter . According to Bloomberg, Musk is seeking to raise fresh equity for what was Twitter but is now X, at a valuation of $44 billion. There have been reports that Elon Musk has been transferring cash from his other businesses to keep X afloat.
Since Musk acquired Twitter in October 2022, its revenues have plummeted as mainstream advertisers fled a platform that Musk – a self-proclaimed free speech absolutist – quickly reopened to previously banned users, allowing racist, homophobic, transphobic posts and hate speech and disinformation to flood in. Musk, in an email to X employees while highlighting the platform’s growing influence and power, said the company’s finances remained problematic.“Our user growth is stagnant, revenue is unimpressive, and we’re barely breaking even,” he is reported to have written. When Musk and a small consortium of equity investors who contributed about $7 billion to the deal acquired Twitter, it had revenue of about $4.5 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) of about $682 million. Last year, revenue was only about $2.7 billion, but after Musk cut Twitter’s headcount by some 80 percent, EBITDA was about $1.25 billion.The interest bill on the $12.5 billion of debt Musk took on to buy the site would absorb almost all, if not all, of the cash the platform is generating. Indeed, there have been reports that Musk has been transferring cash from his other businesses to keep X afloat. One of X’s investors, Fidelity, one of the world’s largest funds managers, has written the value of its investment in X from $19.66 million in 2022 to only $4.2 million, a writedown of nearly 79 percent. A writedown of that magnitude of X’s total valuation would see it worth only $9.24 billion.It’s partly because it appears that X’s revenue decline might have bottomed out, with advertisers starting to return. Musk has also gifted X a 10 percent stake in his xAI start-up, whose last funding round valued it at $40 billion and which is now seeking to raise more funds at a valuation of $75 billion. Musk has said X may end up with 25 percent of xAI. He’s also just struck a deal with Visa that will allow X users to effect peer-to-peer payments and transfer funds from their bank accounts, which gives X the start of a financial dimension to Musk’s ambition of transforming X into an “everything” app. Musk told staff last month the company’s finances remained problematic, according to the Wall Street Journal.His $250 million-plus financial support for Donald Trump’s presidential campaign, his subsequent proximity to Trump, and the power Trump has bestowed on him as head of the “Department of Government Efficiency,” or DOGE, have had a golden halo effect on his businesses. Tesla shares, for instance, have rocketed from about $250 on election day last year to more than $360, adding more than $350 billion to its market value. Bloomberg has estimated that once SpaceX and xAI are included, almost $1 trillion has been added to the value of his companies since the election, and Musk’s own net worth has risen more than 50 percent.It hasn’t gone unnoticed – including by investors in his companies – that Musk’s role in the Trump administration gives him power over the agencies that regulate those companies. Before the election, the US Securities and Exchange Commission was suing Musk over statements made during his acquisition of Twitter. The SEC is now under new, Trump-appointed leadership and Musk’s scrutiny. Trump wants to axe everything climate-related that the Biden administration did, including ending a national rollout of electric vehicle charging stations and removing the tax incentives for EV purchases. The former could benefit Tesla, which has its own EV charging units, while the latter would hurt its competitors more than Tesla. X’s finance ambitions and its arrangements with Visa would have been regulated by the Consumer Financial Protection Bureau (CFPB). Musk’s team of DOGE adolescents, however, has targeted the CFPB, which the administration wants to abolish.Musk’s elevated status in the Trump White House has given his fortune a big boost.With Musk’s team slashing and burning their way through the US bureaucracy and the administration taking, or trying to take, direct control over every aspect of the agencies that survive, bankers, anticipating deregulation, are in risk-on mode. That might explain why the banks that lent Musk money to acquire Twitter have finally been able to offload most of their loans. The Twitter deal was funded by $33.5 billion of equity (most of it Musk’s), $6.5 billion of leveraged loans from the banks, $3 billion of secured bonds and $3 billion of unsecured bond
Elon Musk Twitter Acquisition Financial Struggles Revenue Decline Fundraising Xai Visa Partnership Donald Trump Deregulation SEC CFPB
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