The Billionaire, the Banks, and the Balance Sheet Breakdown

What happens when banks lend $13 billion to a billionaire with a Twitter addiction? Well, let’s just say IFRS 9 wasn’t built for this level of chaos.

In this episode, we break down how banks classify investments in debt—Amortised Cost, FVOCI, or FVTPL—and how that classification suddenly matters a lot when your borrower is firing half the staff, scaring off advertisers, and offering AI equity as collateral.

We explore:

✅ How banks originally classified X’s debt—and why they’re now regretting it.

✅ Why they’re offloading this debt at a discount (spoiler: it’s not a good look).

✅ What this means for the future of banking, financial reporting, and Musk’s ability to raise money.

And just when you think it’s over, we hit you with a real-time update on the great Twitter debt fire sale.

It’s finance, but entertaining. It’s IFRS 9, but actually worth listening to.

So tune in, absorb the knowledge, and then, as per the show’s unofficial motto—listen in secret and forget this ever happened.

You can watch the video of the podcast by clicking here ( @nasirfinancial)

Transcript

Welcome to what is technically the first ever episode of this podcast—because, well, the actual first one was more of an experiment. A slightly impulsive, wildly unstructured attempt at launching this thing almost a year ago.

Now, full disclosure—I make no promises about future episodes. This could be a one-off, a fleeting moment in podcast history. 

So, do me a favor: listen to it in secret, nod along knowingly, and then promptly forget it ever existed.

Right, now that we’ve set expectations at rock bottom, let’s talk about something that actually deserves scrutiny—The Billionaire, the Banks, and the Balance Sheet Breakdown."** 

Right, let’s set the scene. 

You’re a banker—one of those high-flying, number-crunching, risk-assessing types. 

And you’ve just handed over billions to a very high-profile borrower. 

Let’s call him—oh, I don’t know—Elon Musk.

On paper, it all looked solid. 

Regular interest payments, a stable business, and a borrower with a track record of launching rockets and electrifying the auto industry. 

What could possibly go wrong?

Well—quite a lot, actually.

Because, before you know it, your borrower is firing half the workforce, alienating advertisers, and turning his new toy into a chaotic social experiment. 

Your “safe investment” is suddenly wobbling like a three-legged chair on a windy day.

So, what do you do? You sell the debt—at a loss.

Now, this is undeniably bad news for the banks. 

But what’s even more intriguing is how they’re going to account for it. Because under IFRS 9, financial assets aren’t just dumped onto a balance sheet and left to gather dust. 

No, no. They’re carefully classified, evaluated, and—if necessary—reassessed when things start looking shaky.

And if a bank misclassifies them? 

Well, let’s just say the balance sheet can take a hit faster than Musk’s credibility at an AI ethics panel.

Today, we’re peeling back the layers of IFRS 9, investment in debt, and the fascinating financial fire sale happening behind the scenes. I’m going to be discussing the whole thing in three part…

PART 1: How Banks Classify Investments in Debt Under IFRS 9. This part will help you in the exam!

PART 2: So, How Did Banks Classify X’s Debt? 

And finally PART 3: Why This Matters for Accounting and Banking.

And in the end, there’s a little bit of an update on what going on

So let’s start with part 1

PART 1: How Banks Classify Investments in Debt Under IFRS 9

So, let’s start with the basics.

When a bank invests in debt—whether it’s a government bond, a corporate loan, or, let’s say, a multi-billion-dollar lending experiment to a tech billionaire—it needs to classify that investment correctly. And IFRS 9 gives them three ways to do it.

1. Amortised Cost – The ‘Buy and Hold’ Approach

If a bank plans to hold onto the debt and simply collect the agreed interest and principal payments, it classifies the investment as Amortised Cost.

In theory, this is the conservative choice—ideal for stable, predictable cash flows. That is, of course, until your borrower decides to turn his company into the Wild West, and ‘predictability’ becomes more of a distant memory than a financial principle.

🔹 if so, did banks originally classify X’s debt at Amortised Cost? Hard to say for sure, but given recent developments, they’re now perhaps filing it under a newly invented IFRS 9 category: "Fair Value Through Hands-on-Heads and Deep Regret." who knows!

Let’s discuss the second choice. 

2. Fair Value Through Other Comprehensive Income (FVOCI) – The ‘Hold, But Maybe Sell’ Approach

If the bank wanted some flexibility—meaning they might sell the debt later but still expected to collect cash flows—they would classify it as FVOCI.

This means any gains or losses show up in Other Comprehensive Income (OCI)—a lovely accounting trick that lets banks bury bad news in the disclosure footnotes rather than the headlines.

That said, they still have to recognise interest income and impairment losses through the profit and loss statement—so, it’s not a perfect hiding place, after all.

Let’s discuss the third choice.

3. Fair Value Through Profit or Loss (FVTPL) – The ‘Actively Trading’ Approach

If the bank was trading the debt, rather than holding it, they would classify it under FVTPL.

This means every gain, every loss, every painful financial blow goes straight through the P&L statement—whether they like it or not.

So, to wrap up Part 1—banks have three ways to classify debt under IFRS 9, and each tells a different story about their intentions. 

If they planned to hold the debt until maturity, collecting steady interest along the way, it goes under Amortised Cost. 

If they wanted some flexibility to sell before maturity while still earning cash flows, that’s FVOCI. 

And if they decided to lean into their inner gambler, treating debt like a Wall Street casino chip, then it’s FVTPL—because, let’s be honest, some investments were never meant to be held for too long."

let’s start PART 2: So, How Did Banks Classify X’s Debt?

Now, let’s apply this framework to the $13 billion banks handed Musk when he decided to buy Twitter.

Most likely, they classified it as Amortised Cost—because, at the time, they expected to collect cash flows like normal lenders.

Then, reality kicked in:

• Revenue collapsed—advertisers ran for the hills, and subscription revenue? Let’s just say it wasn’t enough to keep the lights on.
• Nobody wanted to buy the debt—investors saw the mess and said, “No thanks.”
• Debt value plummeted—selling it now meant taking a hit.

🔹 Elon Musk paid $44 billion for Twitter. Now banks are selling the debt at a discount. Turns out, Twitter’s not the only thing he’s devalued.

There’s a little update, but I’ll share it at the end. Right now, I’m not about to let reality interfere with a perfectly good narrative.

At this point, banks had to face some harsh accounting realities:

• Keep it at Amortised Cost? Prepare for a painful impairment loss.
• Reclassify to FVOCI? The losses move to OCI, but they’re still losses.
• Had they gone with FVTPL from day one? At least the financial statements wouldn’t be in for a shock.

PART 3: Why This Matters for Accounting and Banking

This whole saga is a masterclass in IFRS 9 in action. It’s one thing to classify financial assets when everything is running smoothly. It’s another thing entirely when your borrower is making impulsive business decisions at 3 AM on a social media platform he now owns.

For banks, this fire sale means:
✅ Immediate losses—which is never a good look on financial statements.
✅ A clean(ish) break from Musk’s unpredictable financial circus.
✅ More scrutiny from regulators—because multi-billion-dollar write-downs don’t go unnoticed.

For X (formerly Twitter), it means:
🚨 A nightmare for future fundraising—because when banks are already offloading your debt at a discount, new investors tend to take that as a rather large red flag.
🚨 More financial instability—those billions in annual interest payments? Still due.

"And now, an update from the financial circus that never sleeps—Elon Musk’s debt drama continues."

• Wall Street banks are finally offloading chunks of the $13 billion debt they’ve been stuck with since Musk’s Twitter takeover. First up? A $3 billion sale 
• Investors like Diameter Capital and Darsana Capital Partners have already snapped up $1 billion of it, with more firms circling. But here’s the twist—Musk has started offering equity in his AI venture, xAI, as collateral to sweeten the deal. 
• Meanwhile, Amazon is creeping back as an advertiser on X, after initially pulling back over ‘content concerns’—or, as we like to call it, ‘Musk being Musk.’ Even Apple is reconsidering. 
• So, what does this mean? X isn’t dead, but it’s still very much in the ICU. Banks are cutting their losses, Musk is making deals, and advertisers are cautiously peeking back in. As for the debt? Well, it's finally moving—just at a discount that wasn’t exactly in the original business plan.

And that, folks, is your breaking news from the world of IFRS 9 and billionaire-backed chaos.

CLOSING: The Takeaway

What have we learned today, if anything?

Understanding IFRS 9 is essential. Because when you lend billions to a man whose approach to corporate strategy resembles posting memes at odd hours, it’s best to have your accounting classifications airtight.

Now, I could wrap it up here and disappear for another year, but let’s be honest—stories like this aren’t going away anytime soon. So, if you enjoyed this, if you want more financial absurdities broken down in the context of IFRS, let me know. Or don’t, and I’ll just assume you’re listening in secret like a guilty pleasure.

Either way, until next time—if there is a next time, you take care and thanks for listening.