Morgan Stanley (MS) advised the Tesla (TSLA) CEO on his $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 using Musk’s Tesla shares as collateral. That should generate lucrative fees and interest income for Morgan Stanley.
Investment banks typically get a 1% to 3% reduction in the value of a merger deal, which is divided among all the banks involved. Based on the purchase price of $44 billion, that works out to a range of $440 million to $1.3 billion.
Morgan Stanley could therefore be considering receiving tens, or even hundreds, of millions of dollars for advising Musk, in addition to Wall Street bragging rights.
Morgan Stanley is one of the largest financial firms in the world. According to the so-called leaderboards followed by the financial times, the bank earned the second-highest amount of investment banking fees in the first quarter. Its $852 million in fees so far this year trails only Goldman Sachs, and is up 87% from the first quarter of 2021.
Morgan Stanley said in its first-quarter earnings report that merger advisory revenue nearly doubled from a year earlier. But overall investment banking revenue was held back by a slowdown in initial public offerings and corporate bond sales during a rough first three months for the broader market.
The bank did not comment on the company’s work for Musk or Tesla.
But it shouldn’t be too much of a surprise that Musk is working with Morgan Stanley. After all, he has a relationship of more than a decade with the company. And the bank was one of four underwriters to Tesla’s initial public offering in 2010, along with Goldman Sachs (SG), JPMorgan Chase (JPM) Y german bank (database).
Morgan Stanley auto analyst Adam Jonas is one of the biggest Tesla bulls on Wall Street. Jonas currently has a “buy” rating on Tesla stock and a price target of $1,300, 30% above the current stock price of approximately $1,000 per share.
Jonas has also recently written positive reports on the prospects of two of Musk’s multi-billion dollar private companies, SpaceX and The Boring Company. Jonas even suggested in 2017 that Tesla and SpaceX should merge, and more recently predicted that SpaceX could eventually help Musk become a billionaire.
So even if Musk’s acquisition of Twitter doesn’t turn the company into a social media giant that can challenge the owners of Facebook and Instagram. Metaplatforms (full board), Snapchat (BREAK) or TikTok, Morgan Stanley could still benefit.
Anything the investment bank does to stay in Musk’s good graces could be beneficial, especially if the world’s richest person seeks advice on more mergers for Tesla, an IPO for SpaceX or The Boring Company or whatever other whims he requires. collect more cash. his fantasy