After years of trying to revive his flailing social media company, Elon Musk has pulled off a turnaround at X. It comes after Musk decided to merge X with his artificial intelligence company xAI. The deal values the combined business at over $100 billion. WSJ’s Alexander Saeedy explains how Musk has pulled the app formerly known as Twitter back from the brink of bankruptcy, thanks in part to his proximity to President Donald Trump. Jessica Mendoza hosts. Further Listening: - The Musk-Twitter Saga -- from The Journal. - Trump 2.0: The Musk-Trump Bromance Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What challenges did Elon Musk face when acquiring Twitter?
The platform formerly known as Twitter has had a tough couple years. The difficulties began in 2022 when Elon Musk purchased it for $44 billion.
The world's richest man bought the social media platform last week. Nearly a million Twitter users leave as Elon Musk takes over.
Advertisers continue to flee the platform, many of them citing Musk's controversial moves as the company... Musk said Twitter was quickly losing money and filing for bankruptcy is not out of the question.
Elon Musk is scrambling quite simply to prevent the social media platform from collapsing.
Chapter 2: How did Elon Musk finance the acquisition of Twitter?
To buy Twitter, which Musk renamed X, he and a small group of investors spent some $30 billion of their own money. But Musk also had to borrow $13 billion more from big banks like Morgan Stanley and Bank of America. And as the platform started to struggle, those banks felt the pain. Here's our colleague, Alexander Saidi, who covers banking.
It was a really tough deal for the banks. They were stuck holding debt that, you know, while they were getting paid interest on it, they don't want to, you know, have their money tied up in these loans. So it wasn't something they loved. But we're talking now because the story's changed. The story has changed.
While another one of Musk's big-name companies, Tesla, has been in a slump recently, X has seen a huge turnaround. Last month, the company reached its highest valuation since Musk took over. And he said that X is now worth more than the $44 billion he paid for it.
It's as much of the company's performance as it is, one, the world's richest man owns this company, and two, he's now very close with the most powerful man in the United States, the president.
Chapter 3: What role did Elon Musk's relationship with Donald Trump play in X's turnaround?
Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Wednesday, April 16th. Coming up on the show, how Elon Musk pulled off a comeback for X. It didn't take long after Musk's takeover of Twitter for the company to stumble. One of his first moves, besides renaming the site to X, was to lay off many of the company's workers.
As part of that, he dismantled the platform's content moderation team. And soon after, X began to lose revenue, in part because advertisers started to flee.
Advertisers started to signal that they weren't sure that they wanted to keep advertising on Twitter, soon to be X, because of the new ownership. The financial picture just really deteriorated, and that was true for about two years now.
Soon after Musk took over, he said that the company was on the brink of bankruptcy. In 2023, the company was valued at roughly a third of what Musk paid for it. But while his business was on a downturn, Musk himself was growing closer with someone who was on the rise.
Where is he?
Come on up here, Elon. Donald Trump.
Take over, Elon. Yes, take over.
Musk officially endorsed Trump and showed up to a number of his rallies. He also donated more than a quarter of a billion dollars to the re-election effort. When Trump took office in January, Wall Street was excited about his expected pro-business policies. And Musk, with his close relationship to Trump, also got a boost.
Musk capitalized on a wave of investor enthusiasm for him and his companies. Because of his alliance with President Trump, you know, there's a lot of Trump trades happening around that time. And in a way, X kind of looked like another Trump trade. And I think that that's what people felt really positive about.
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Chapter 4: How did advertisers respond to changes at X under Elon Musk?
In one incident last December, one of X's lawyers called up a big advertising firm, Interpublic, which was in the middle of a big merger with another ad company. According to Wall Street Journal reporting, X wanted to see Interpublic spend more on ads on the platform.
A lawyer from X called a lawyer at this advertising group Interpublic and said that your deal to Merge could face trouble given Musk's sort of powerful role there. So we need you to sort of, you know, play ball with us. Otherwise, we can make your life a little difficult.
Can they do that? Is that legal?
Well, they did it, according to our reporting. And I don't think it was sort of like, if you don't advertise now, we're blocking the merger. But I think it was more of a sort of like, it's a nice ad agency you got there. It would be a shame if something happened to it.
At the time, a spokesman for Interpublic said the company does not make spending commitments on behalf of its clients. Representatives from X did not respond to requests for comment. With some advertisers returning to X, revenue has started to tick back up, according to the journal's reporting. The aggressive cuts Musk had made early on also helped the company's finances to recover.
For the banks that invested in the original deal, this was all great news. It meant they might be able to offload some of Musk's debt.
The way bank loans like that often work is that the banks, while they sort of put the cash upfront, you know, to make sure the deal can happen, they often will sell and cut up those loans and give them to a broad investor base. You know, everything from mutual funds that can hold corporate debt, like a bond fund, to asset managers who focus on corporate debt.
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Chapter 5: What tactics did X use to regain advertiser support?
And that was the plan on the bank's side.
And earlier this year, the banks tried to finally make that sale. In January, a crowd of investors gathered in an auditorium at the Morgan Stanley office in New York. The banks were there to sell about $3 billion of Musk's debt.
It was the first time that the banks had decided we were going to test the whole market and see if there's interest in buying this debt.
And things went really well, better than the banks even expected.
All in, including a series of transactions that played out over, you know, about a month after that happened, the banks ended up selling $10 billion of debt all in when they were only planning to sell around three.
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Chapter 6: Are X's aggressive strategies to keep advertisers legal?
The debt sale shows just how far X has come in the past year. And recently, Musk made an announcement that builds on that success. It has to do with another one of his companies, XAI. That's after the break.
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In 2023, Elon Musk founded an artificial intelligence company. And he named it, of course, XAI.
Chapter 7: How did Elon Musk's cost-cutting measures impact X's financial recovery?
Musk really likes X. I'm sure there must be something about it.
Like, you know, space X. It's his favorite letter, right?
Chapter 8: What is the significance of banks in Elon Musk's deal to buy Twitter?
Yeah, yeah, yeah. There must be some reason to it. He's such a nerd. Like, I'm sure there's some nerdy reason. I'd say this as a nerd myself.
XAI is best known for its AI chatbot, Grok. Its most notorious feature is that when it answers questions, it might swear. And overall, Grok has an edgier attitude than your typical chatbot. XAI isn't the world's biggest artificial intelligence platform, but investors see it as a startup with potential. And one key advantage XAI can boast is its connection to Musk's other companies.
First of all, when it comes to creating an artificial intelligence model, engineers have to feed that model tons of data. And thanks to X, there's a lot of available data for XAI.
XAI has trained itself off of X slash Twitter data, which is quite extensive. And there's a lot of data that automatically gets loaded up to it, financial market data, commentary, news. So one of the advantages I think XAI has is that it's not training itself off of a static set of existing data.
It actually has found a sort of live database that is truly in real time being updated with developments around the world.
According to people familiar with the matter, XAI has paid X hundreds of millions of dollars for that data, which is helping the social media company pay its bills. And that's not the only financial tie between the two. X has given XAI computer chips and other crucial hardware. And in return, X got a bunch of stock in this increasingly valuable AI company.
This close relationship extends to employees as well.
People were starting to sort of work for two companies at the same time. Like you started to see there were people at X who had, you know, two hats at once. They were both XAI and X engineers, for example. So Elon was very purposefully, you know, moving resources inside of his empire towards the AI company. It was clearly a big priority for him.
Would you say that Musk is using or has used XAI to maintain X's success or X's viability?
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