Morgan Stanley (MS) is advising Tesla’s chief executive (TSLA) on its $ 44 billion acquisition of Twitter (TWTR). The bank also helped secure $ 25.5 billion in financing for the deal, including $ 12.5 billion in loans that use Musk’s Tesla shares as collateral. This should lead to lucrative fees and interest income for Morgan Stanley.
Investment banks typically receive about a 1% to 3% reduction in the value of the merger transaction, which is shared between all participating banks. Based on a purchase price of $ 44 billion, that’s in the range of $ 440 million to $ 1.3 billion.
So Morgan Stanley could seek tens or even hundreds of millions of dollars from Musk’s advice, plus Wall Street’s bragging rights.
Morgan Stanley is one of the most famous financial companies in the world. According to the so-called league tables, followed by the Financial Times, in the first quarter the bank received the second largest amount of investment banking fees. Its $ 852 million fees so far this year are just behind Goldman Sachs, up 87 percent from the first quarter of 2021. Morgan Stanley said in his first-quarter earnings report that revenues from merger consulting services doubled. compared to a year ago. But total investment banking revenues were held back by delays in initial public offerings and sales of corporate bonds during the difficult first three months for the wider market.
The bank did not comment on the company’s work for Musk or Tesla.
But it should come as no surprise that Musk is working with Morgan Stanley. After all, he has had a relationship with the company for more than a decade. And the bank was one of four insurers for Tesla’s IPO in 2010, along with Goldman Sachs (GS), JPMorgan Chase (JPM) and Deutsche Bank (DB).
Morgan Stanley’s automotive analyst, Adam Jonas, is one of Tesla’s biggest bulls on Wall Street. Jonas currently has a buy rating of Tesla shares and a target price of $ 1,300, 30% above the current share price of approximately $ 1,000 per share.
Jonas also recently wrote positive outlook reports for two of Musk’s multibillion-dollar private companies, SpaceX and The Boring Company. Jonas even suggested in 2017 that Tesla and SpaceX should merge, and recently predicted that SpaceX could eventually help Musk become a trillionaire. So, even if Musk swallows Twitter, doesn’t turn the company into a social media giant that could trigger similar Facebook and Instagram owner Meta Platforms (FB), Snapchat (SNAP) or TikTok, Morgan Stanley can still take advantage.
Anything the investment bank has done to stay in Musk’s favor could be helpful, especially if the world’s richest man seeks advice on more Tesla mergers, an IPO for SpaceX or The Boring Company, or whatever. a whim that requires him to collect more cash strikes his imagination.
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