X Inches Toward Profitability: Investor Optimism Grows Amid Debt Sale and AI Integration

Elon Musk’s tumultuous stewardship of X, formerly known as Twitter, has been marked by aggressive restructuring, advertiser exodus, and an ongoing financial overhaul. However, recent developments indicate that investors are beginning to place fresh bets on the social media platform’s future. According to the Wall Street Journal, a recent sale of $5.5 billion in debt tied to X has fueled optimism, suggesting that the company’s financial trajectory may be stabilizing despite persistent challenges.

Banks Capitalize on Investor Demand for X Debt

In a significant move, major banks, including Morgan Stanley, Bank of America, and Barclays, successfully offloaded $5.5 billion in loans backed by X at 97 cents on the dollar—an upsize from an earlier plan to sell just $3 billion at 95 cents on the dollar. The sale, which included floating-rate loans with an interest rate hovering around 11%, underscores renewed investor confidence in Musk’s ventures. While these debts remain among the riskiest on Wall Street, surging demand led banks to mark up their positions, mitigating previous write-downs from the loans extended for Musk’s 2022 acquisition of the platform.

For banks, the transaction represents a moment of relief after being stuck with the loans amid X’s struggles to retain advertisers post-acquisition. The ability to sell at a higher price reflects a notable shift in market sentiment—one driven by Musk’s growing influence in Washington and the improving financial outlook of X.

X’s Financial Health: A Gradual Recovery?

Per WSJ, CEO Linda Yaccarino and Morgan Stanley bankers have actively courted investors, presenting X’s improving financials in a recent meeting. The company reported adjusted EBITDA of approximately $1.25 billion for 2024, with annual revenue standing at $2.7 billion. While this still falls short of the $5 billion in revenue recorded in 2021 before Musk’s takeover, it marks a significant increase from the adjusted EBITDA of $682 million seen pre-acquisition.

A key component of X’s recent financial stability stems from its relationship with Musk’s AI venture, xAI. Financial disclosures indicate that xAI has transferred hundreds of millions of dollars to X, helping the social media company remain current on obligations. X now holds a 10% stake in xAI, valued at roughly $5 billion—an asset that is beginning to shape the company’s investment narrative.

The Musk Factor: Washington Influence and Advertiser Rebound

One of the more unexpected drivers of X’s financial resurgence has been Musk’s increasing political clout. His proximity to President Trump—who appointed him to lead the Department of Government Efficiency—has reassured investors betting on X’s potential regulatory advantages and influence. Some of X’s largest advertisers, including Disney and Amazon, have returned or increased their ad spending on the platform, signaling cautious industry optimism. This marks a stark turnaround from 2023 when several major advertisers fled following mostly false accusations coordinated by liberal interest groups about content on the platform. X is currently suing those groups who have since disbanded in shame.

Upon taking over Twitter, Musk famously fired the censorship department, which was later found to have coordinated with the Biden Administration and various 3-letter agencies to censor content that went against the administration’s narrative. This includes censoring very real news on Hunter Biden’s laptop, which could have doomed Biden’s chances of winning the election. The Twitter files also exposed massive shadow banning of conservatives, including an outright banning of the President of the United States. Facebook also banned Trump, although, in recent interviews, Zuckerburg has said that shouldn’t have happened. He noted that the Biden administration put massive pressure on them to do so.

The subsequent advertiser pullback, coupled with Musk’s public remarks—famously telling departing advertisers to “go f— yourself”—intensified financial concerns. Musk pointed out that he would not censor truth and opinions just because liberals disagreed. Instead, X launched Community Notes, enabling all users to expose posts that were untrue or needed improvement. Interestingly, this approach is being copied by Facebook as it also says it will no longer censor posts. This has led to an advertising renaissance at X. For instance, Amazon is ramping up its spending, and Apple is reportedly in discussions to reintroduce advertising on X.

Challenges on the Road to Sustainable Profitability

Despite these positive indicators, significant hurdles remain. X still carries roughly $6 billion in unsold debt, considered riskier according to WSJ than the portion recently offloaded. The company’s reliance on Musk’s other ventures—particularly xAI—for financial support raises concerns about long-term sustainability. Additionally, while some advertisers have returned, X’s advertising revenue remains well below pre-acquisition levels, but it is at least making substantially more profit than Twitter was.

Moreover, investor enthusiasm appears contingent on Musk’s broader ecosystem of companies rather than X’s standalone viability. The extent to which X can leverage its relationship with xAI and other Musk-led initiatives to generate sustained revenue growth will determine its long-term success.

* This article was originally published here