One of many lessons from the Twitter fiasco: Billionaires make up, and bankers believe, all kinds of bullshit. Published in Rappler on November 25, 2022.
To buy Twitter, Elon Musk had to pay not only the $44-billion acquisition price but also what are called closing costs. The total amount was substantially higher: $46.5 billion. A consortium of major banks, including Morgan Stanley, Barclays, and Bank of America, provided Musk with almost $13 billion in debt financing. In other words, aside from putting up his own money (largely by selling Tesla stock) and convincing investment funds to take a stake, Musk had to take out a loan.
At around the time the acquisition was completed, at the end of October, the banks were already looking at a potential loss of half a billion dollars if they had sold their debt then. Now, according to a Reuters report based on a Financial Times story, the banks are looking to hold on to their debt (that is, not sell them off), having "conceded they will be stuck holding the debt on their books for months or even longer and will probably end up incurring huge losses on the financing package."
Question: How was it possible that ostensibly responsible bankers approved a multi-billion-dollar loan that started losing value the moment the loan was cleared?
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