At least one Wall Street advisory firm that worked on the blockbuster technology deal that everyone wanted a piece of ended up losing money on the deal.
Innisfree M&A Incorporated, which advised Twitter on its sale to Elon Musk last year, filed a lawsuit against the company on Friday in New York State Supreme Court, alleging it is owed approximately $1.9 million in unpaid fees. Twitter retained Innisfree in May of last year to aid in communicating with investors about the $44 billion acquisition. In October, when Mr. Musk finally closed on his purchase of Twitter, he was left footing the bill.
According to the complaint, as of December 23, 2022, Twitter has failed to fulfil its $1,902,788.03 payment obligation to Innisfree under the agreement.
As of this writing, neither Twitter nor an attorney for Innisfree had responded to requests for comment.
The lawsuit filed by Innisfree is just the latest indication that, since Mr. Musk took control of Twitter, the company has stopped paying some of its vendors, advisers, and other service providers. As a result of the acquisition, Twitter took on a substantial amount of debt, which it must now repay in full, plus interest, while also dealing with falling sales. Since then, Mr. Musk has reduced expenses to balance the books.
The San Francisco building’s owner company has accused Twitter of not paying more than $3 million in rent, a claim that the social media giant has denied. In London, legal action has been taken against Twitter for rent nonpayment.
The private jet company claimed it was owed $197,725 by Twitter for flights taken by a former executive during the closing of the deal but the company never received payment from Twitter.
Some of Twitter’s former executives were set to receive multimillion-dollar payouts when Mr. Musk fired them, but he has avoided paying them. Many fired Twitter employees filed lawsuits because the company’s severance package fell short of what they had been promised by the company’s previous management.
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Companies like Innisfree often act as a mediator between shareholders and executives during mergers and acquisitions. Innisfree advised Twitter’s management and communicated with shareholders extensively before the vote in September 2017 to approve the sale to Mr. Musk.
Innisfree claims in its lawsuit that it first billed Twitter on September 26. Tweets about the invoice being “successfully processed” appeared around October 28. According to the complaint, Innisfree followed up twice in December when it had still not been paid. On December 23rd, the consulting firm, through its attorney, formally requested payment from Twitter. However, the firm has not yet received a response from the social media giant.
Mr. Musk’s deal for Twitter, the largest leveraged buyout of a technology company, may not have been profitable for other Wall Street firms, either. Investors from Morgan Stanley, Bank of America, and Barclays provided Mr. Musk with about $13 billion in funding for his purchase. Of course, they made that financial commitment before inflation, interest rate hikes, and Mr. Musk’s attempt to call off the deal. Since then, they’ve been unable to offload the related debt from their books.
For the most part, investment banks would rather sell any debt they end up holding in the event of nonpayment than keep it in the event of default, and they make money off the fees they charge to arrange these deals. The market value of Morgan Stanley’s leveraged loans fell since the deals were financed, resulting in a $356 million write down last month.
