A year after Elon Musk took over Twitter, now called X, user and advertiser numbers have plunged and the banks that financed the US$44 billion deal, including Morgan Stanley (NYSE:MS) and Barclays, are sitting on an estimated 15% hit.
X app downloads have fallen roughly 38%, monthly active users by 14.8% and its US ad business was down 60% over the year, according to data reported by Axios on Thursday.
The seven lenders that provided US$12.5 billion to help finance the deal, which also included Bank of America, Japanese pair MUFG and Mizuho, and France's BNP Paribas and Société Générale, found it hard to offload the debt from the start, and have still not been able to get rid of it due to poor investor appetite for X, the Wall Street Journal reported.
As a result., the banks have held the debt on their own balance sheets at a discounted value, sources told the newspaper, resulting in hundreds of millions in losses for the main backers Morgan Stanley (NYSE:MS), Bank of America, Barclays and MUFG.
Preparations to offload the debt are underway, the WSJ sources said, but if ratings from credit agencies like Moody's and S&P are low, it will be tough for the banks to sell the debt without incurring substantial losses.