Context: "Put it all together, and X isn’t just worth less than Musk paid for it, but likely less than its debt. Assume that the company’s revenue last year was $4.7 billion, based on results before it was taken private. If advertising has dropped by half, then this year’s sales should be a bit over $2.5 billion. Put that on the same enterprise-value-to-sales multiple as Snap, which is down to a mere 3 times, and X is worth around $8 billion.
"The company is so far covering its hefty interest payments of $300 million per quarter, and Yaccarino sees profitable days ahead. But between Musk’s impromptu product shifts and the need to woo back advertisers, her task is daunting. If things deteriorate further, the company’s bankers - already nursing billions in on-paper losses - face the prospect of taking back the keys to a diminished platform that is worth less than even their claim on it."
RESOLUTION: This question will resolve to YES if X / Twitter creditors repossess the company from shareholders before January 1, 2025. This question will resolve to NO if X / Twitter creditors DO NOT repossess the company from shareholders before January 1, 2025.
DISCLAIMER: There are other possible outcomes, including Musk purchasing outstanding debt from creditors, creditors accepting a write down / cancellation of portions of the outstanding debt, or creditors just maintaining their X debt holdings or selling the debt to others. I may choose to bet on the outcome in this market but will certainly resolve this market fairly.
https://www.reuters.com/breakingviews/elon-musks-x-is-black-hole-value-2023-10-03/
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1,000
3.00
“Large hedge funds and credit investors on Wall Street held conversations with the banks late last year, offering to buy the senior-most portion of the debt at roughly 65 cents on the dollar. But in recent interviews with the Financial Times, several said there was no price at which they would buy the bonds and loans, given their inability to gauge whether Linda Yaccarino, X's chief executive, could turn the business around.”
https://www.ft.com/content/bc0b6534-c1b6-4979-bc21-30c1ff4594a2
Additional context as well as the case for other outcomes:
“The most likely course where Musk wins, Talley reckons, is an accord where the banks simply erase large portions of the borrowings, canceling for example either the $6.5 billion term loan or the $6 billion in bridges' successors. Then, they could syndicate the remaining debt at something like full price, since X would be a far safer company. "That would be the cleanest, simplest solution, and the banks wouldn't grouse much because Musk is a 600 pound gorilla that controls lots of future financings," notes Talley.
“But he also finds it highly possible that Musk's seeking just the kind of swashbuckling coup he so relishes: A gambit where he buys part, or even all, of the debt at a steep discount. Then, he’d become both X’s biggest shareholder and potentially largest creditor. X would owe Musk gigantic interest payments. But his goal is reducing or eliminating that burden to help make X a profitable enterprise. Hence, in exchange for the billions paid for the debt, he’d demand a huge new slug of X shares, and secure another big discount by paying, say, half the purchase price of $54.20, diluting his co-investors but in the same motion saving X.”
https://finance.yahoo.com/news/elon-musk-13-billion-whip-171340881.html
