Morgan Stanley’s willingness to stick it out with Elon Musk is giving its first-quarter results a healthy boost.
The bank earned US$692 million in “other” revenue in its investment bank, versus US$242 million a year ago. Much of that increase was tied to offloading loans of Musk’s social-media platform X, according to a person with knowledge of the matter.
Morgan Stanley said in its earnings statement Friday that the increase was “principally driven by realized gains on the sale of corporate loans held-for-sale,” without elaborating on which loans.
A representative for Morgan Stanley declined to comment. It reported earnings of US$4.3 billion in the three months ended March, according to its statement.
Morgan Stanley was leading the group of banks providing debt for Musk’s 2022 buyout of social-media platform Twitter, now called X. For much of the period since then, the banks had been stuck with US$13 billion of that debt, unable to find willing buyers.
The billionaire’s relationship with President Donald Trump, X’s stabilized finances and its stake in artificial intelligence startup xAI all combined to help win over investors who had spurned banks’ attempts to offload the borrowings for more than two years.
Morgan Stanley has also benefited along the way from the interest that X was paying on the debt. That helped make it a rarity: A hung deal in the market where the banks made money off the transaction instead of getting saddled with losses.
Since, Musk’s xAI has swallowed up X in a surprise deal, where it valued the social-media platform at roughly the same level at which Musk struck the buyout in 2022. The deal gives the new combined entity, called XAI Holdings, a value of more than US$100 billion, Bloomberg reported. Morgan Stanley was the sole banker on the deal, representing both sides.
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Hannah Levitt, Bloomberg News
--With assistance from Sridhar Natarajan.
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