Banks have successfully made an upsized sale of some of X’s debt to the tune of $5.5 billion, as interest in politically influential owner Elon Musk grows. Wall Street banks, including Morgan Stanley (MS), Bank of America (BAC), and Barclays (BCS), were initially poised to sell $3 billion of the loans at 95 cents on the dollar, but Musk’s growing ties with President Trump has increased investors’ attraction to his social media company. Banks were able to finally sell the debt at 97 cents on the dollar.
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Here’s Why Investors Are Betting on Musk’s X
Recently, X has been able to win back large advertisers to its platform, thanks to Musk’s political clout. This has enhanced the social media platform’s attractiveness, with investors keen to invest in Musk’s companies. Last week, Amazon.com (AMZN) increased its advertising on X, while iPhone maker Apple (AAPL) is in discussions to resume ads. Growing advertisements are expected to boost X’s revenues and financial health.
The debt sold yesterday was part of X’s most senior floating rate debt on the banks’ balance sheets, carrying a high 11% interest rate. Interestingly, banks still have $6 billion worth of riskier X loans on their books, which are yet to be offloaded.
Banks helped finance Musk’s Twitter (now X) takeover in late 2022. However, owing to advertisers exodus from X in 2023, the value of X’s debt on banks’ balance sheets fell drastically. This compelled banks to hold on to the risky debt for a prolonged period.
X’s Financials Are Improving
On January 31, X’s CEO Linda Yaccarino and Morgan Stanley executives presented X’s improving financials to prospective investors. X’s EBITDA (earnings before interest, tax, depreciation, and amortization) for 2024 stood at $1.25 billion, while revenues came in at $2.7 billion. In 2021, however, before the takeover, the situation was different. X had revenues of $5 billion and EBITDA of $682 million back then.
The team also said that X has a roughly $5 billion worth of stake in Musk’s AI company xAI, helping them make a more confident decision. Currently, X’s stake in xAI stands at 10% and Musk intends to increase it to 25%. All these factors are influencing investors to make big bets on Musk again.
Is Tesla a Good Stock to Buy Right Now?
Musk’s shenanigans and decisions have always impacted the performance of his companies. Having said that, times have changed, and Musk is in a very influential position right now. His EV (electric vehicle) company Tesla (TSLA) is also poised to benefit from Trump administration’s favorable policies.
On TipRanks, TSLA stock has a Hold consensus rating based on 12 Buys, 12 Holds, and nine Sell ratings. Analysts still prefer to remain on the sidelines on the stock owing to heated competition in EV space and declining demand. The average Tesla price target of $338.85 implies 10.4% downside potential from current levels. In the past year, TSLA stock has gained 104.3%.
