Morgan Stanley has launched another major sale of X Corp. debt, capitalising on renewed investor enthusiasm for the social-media platform owned by billionaire Elon Musk. The Wall Street giant is offering nearly $3 billion in loans, held alongside other banks, in a bid to offload debt linked to Musk’s controversial 2022 acquisition of Twitter, now rebranded as X.
The move follows the successful sale of $5.5 billion in X debt last week, a significant turnaround from initial concerns that the financing deal would be a costly misstep. Investors, once wary of Musk’s takeover and its impact on the platform’s advertising revenue, have had a change of heart amid his strengthening ties to the White House.
Investor confidence rises amid political ties
Musk’s growing influence in Washington, particularly his close association with former President Donald Trump, has reshaped investor sentiment toward X. Although his drastic cost-cutting measures and content moderation changes initially alarmed advertisers, his proximity to political power has spurred renewed optimism about X’s financial prospects.
Morgan Stanley has seized the opportunity to shed more of the debt that had previously been difficult to sell. Investors were given access to financial data suggesting that X’s earnings and revenue have stabilised, partly due to increased advertising activity around the upcoming US election.
Additionally, Morgan Stanley highlighted X’s involvement in Musk’s artificial intelligence venture, xAI, as a potential long-term asset. The value of this stake has drawn further attention following reports that Musk has initiated an unsolicited $97.4 billion bid for OpenAI, the main competitor to xAI. This move underscores his broader ambitions within the AI industry and has fuelled speculation that X’s financial standing could benefit from his expanding tech empire.
Debt sale gains momentum
The surge in demand for X’s debt has allowed Morgan Stanley to offer the latest loan tranche at a higher price than anticipated. Market insiders suggest the new debt will likely be priced at 98 cents or more on the dollar, carrying an interest rate of 9.5 per cent.
The proceeds from this sale will be used to repay an existing first-lien secured bridge loan tied to Musk’s buyout of the company. The transaction is expected to close later this week.
When Musk took Twitter private in 2022, banks led by Morgan Stanley provided $13 billion in debt financing. However, investors initially steered clear, alarmed by Musk’s sweeping layoffs, his push for paid subscriptions, and the platform’s sharp revenue decline. Some funds were reportedly willing to buy the debt for as little as 60 cents on the dollar at the time, marking one of the steepest markdowns in recent financial history.
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In a bid to test investor appetite, Morgan Stanley sold a $1 billion slice of the debt last month, paving the way for last week’s larger $5.5 billion sale. Encouraged by the strong demand, the bank has now expanded the offering to reduce its exposure further.
Wall street banks offloading X debt
Morgan Stanley, which advised Musk on the Twitter acquisition and played a leading role in financing the deal, remains the largest holder of X’s debt. Other banks involved in the financing include Bank of America, Barclays, Mitsubishi UFJ Financial Group, BNP Paribas, Mizuho Financial Group, and Société Générale.
Despite the turnaround in investor sentiment, X still faces challenges in rebuilding its advertising business. Many advertisers remain cautious about returning to the platform, citing concerns over brand safety and content policies. However, Musk’s influence in AI, his government connections, and his aggressive restructuring efforts have convinced some investors that X is on a path to recovery.
A representative for Morgan Stanley declined to comment on the latest loan sale, but with the appetite for X’s debt growing, Wall Street appears to be making the most of Musk’s political and technological influence.
As the sale moves forward, all eyes will be on whether Musk’s grand vision for X and its integration into his broader empire can sustain investor confidence in the long run.
