When Elon Musk acquired Twitter for $44 billion in October 2022, he relied on seven major banks for $13 billion in loans, which seemed like a sound decision based on Musk’s successful track record. However, the financial landscape has shifted, leading to significant challenges for these banks:

– Musk’s purchase has resulted in an estimated 71.5% drop in Twitter’s value by March 31, with loans remaining unpaid despite interest payments.
– The loans are classified as “hung,” meaning they cannot be offloaded, marking the longest such period since the 2008 financial crisis.
– Banks could sell these loans at a loss, but repayment by Musk could lead to recovery of their investments and high interest rates amounting to $1.5 billion annually.
– A decline in advertisers and unsuccessful monetization strategies further complicate the banks’ ability to manage these loans.
– Investment banking rankings have also shifted, disadvantaging banks like Bank of America and Morgan Stanley, which led the league tables before the deal.

Additionally, co-investors, including Andreessen-Horowitz and Larry Ellison, alongside Fidelity and Saudi Arabia’s sovereign wealth fund, have also faced financial exposure from this deal. Meanwhile, Musk’s personal losses are estimated at $17 billion.

On a broader scale, criticism of Musk’s management style includes concerns over public safety and harassment issues since dismantling Twitter’s safety board, as well as a notable lawsuit involving cyberbullying.