Elon Musk might be the richest person in the world, but that doesn’t mean every decision he makes is flawless. Case in point: according to recent reports, his decision to buy Twitter has become one of the worst merger financing deals for banks since the 2008-2009 financial crisis. In October 2022, seven banks, including Morgan Stanley and Bank of America, lent Musk billions to take Twitter private. Typically, banks sell takeover loans to investors to recoup their money and earn fees. However, due to X’s poor financial performance, the banks have been unable to offload the debt without incurring hundreds of millions of dollars in losses, leaving the loans stuck on their balance sheets.
The value of these loans plummeted soon after Musk’s $44 billion acquisition. A new analysis shows that Twitter’s loans have remained unsold longer than any similar deal since the financial crisis. Banks seldom have problems selling or writing off most of their unsold debt within a year, but this hasn’t been the case with X.
Insiders say the banks agreed to finance the deal despite recognizing it as overpriced, largely because of the allure of working with the world’s richest man. Musk and other investors contributed about $30 billion, providing something of a financial safety net for the banks. However, nearly two years after the acquisition, X continues to struggle, with the company’s value dropping by more than half, and while platform usage has increased, there is no sign of a significant recovery in ad revenue.
Debt burdens bank profits, and holding onto high-risk loans invites regulatory scrutiny. These suspended loans have also led to cuts in compensation for investment bankers, with some banks discussing restructuring the deal to ease the financial strain, though no plan has been implemented.
Musk’s acquisition of Twitter is just the latest in a series of high-stakes moves that have backfired, demonstrating that even the wealthiest and most ambitious entrepreneurs are not immune to failure. While his ventures have pushed the boundaries of technology and industry, they have also faced significant setbacks and near-catastrophic challenges. To fully understand the scope of Musk’s journey, it’s essential to explore the timeline of his notable failures, each of which has shaped his path to becoming one of the most influential figures in the world today.
1995: Musk receives a job rejection from Netscape
Just before the internet started to take off, Elon applied for a job at Netscape, the pioneering web browser company. Despite his impressive academic background, he didn’t make it past the interview stage. The reason for the rejection is unclear, but it’s likely that his lack of experience in the tech industry was a contributing factor.
1996: Fired as CEO of Zip2
The board decided to replace Musk as CEO with a more experienced executive, leading to Musk’s departure from Zip2, the software company he co-founded with his brother Kimbal. Musk’s lack of managerial experience and disagreements with investors over the company’s direction led to the decision, though he remained a shareholder.
1999: The predecessor to PayPal was voted one of the 10 worst businesses of the year
Despite being a widely used online payment system today, PayPal, formerly known as Confinity, was subject to significant criticism and ranked among the top 10 worst businesses of the year. The company struggled with major security issues, including rampant fraud and hacking incidents, which undermined user trust. Additionally, people perceived its initial business model, which centered on enabling payments through PalmPilots, as impractical and poorly executed. Musk would be fired from the company a year later, while on his honeymoon no less!
2006-2007: The first and second SpaceX rocket launches both end in disaster
In 2006 and 2007, SpaceX’s first three rocket launches, the Falcon 1, all ended in failure as the rockets exploded shortly after liftoff. These early setbacks raised doubts about the company’s capabilities and its founder Musk’s vision of reducing spaceflight costs. There would be an additional failure in 2013 and a fourth rocket explosion in 2015.
2008: Tesla and SpaceX were on the verge of bankruptcy
Tesla and SpaceX faced severe financial difficulties, teetering on the edge of bankruptcy. Tesla struggled with production delays and high costs for the Roadster, while SpaceX had the aforementioned three consecutive failed rocket launches. The global financial crisis exacerbated these challenges, making it nearly impossible to secure new funding.
2016: Tesla Model X deliveries were delayed more than 18 months
People who purchased the Tesla Model X expecting it in early 2016 had to wait until mid-2017 to receive it due to production challenges and issues with its complex design, particularly the unique falcon-wing doors. These problems led to significant bottlenecks and quality control issues, frustrating customers and raising questions about Tesla’s ability to meet production deadlines.
