Morgan Stanley(Mrs.) advised Tesla(TSLA) CEO at $44 billion Obsession from 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 result in profitable fees and interest income for Morgan Stanley.
Investment banks usually get a reduction of 1% to 3% of the value of the merger deal, which is divided among all participating banks. Based on the purchase price of $44 billion, this comes to a range of $440 million to $1.3 billion.
So Morgan Stanley could be looking for tens – or even hundreds – of millions of dollars in advising Musk, as well as bragging rights on Wall Street.
Morgan Stanley is one of the preeminent financial companies in the world. According to the so-called league tables it tracks financial timesThe bank earned the second largest amount of fees from investment banking in the first quarter. Its $852 million fee so far this year has only lagged behind Goldman Sachs, and is up 87% from the first quarter of 2021.
Morgan Stanley said in First Quarter Earnings Report Consultancy revenue for mergers nearly doubled from a year ago. But overall investment banking revenue was hit by a slowdown in initial public offerings and corporate bond sales during the tough first three months for the broader market.
The bank has not commented on the company’s work for Musk or Tesla.
But it shouldn’t come as a huge surprise that Musk is working with Morgan Stanley. After all, he has a long relationship with the company for more than a decade. The bank was one of four underwriters for Tesla’s 2010 IPO, along with Goldman Sachs(p)And c. B. Morgan Chase(JPM) And German Bank(DB).
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, which is 30% higher than the current share price of nearly $1,000 per share.
Jonas also recently wrote positive reports about the prospects for two of Musk’s multi-billion dollar private companies, SpaceX And Boring Company. Jonas even Proposed in 2017 that Tesla and SpaceX should merge, and recently predicted that SpaceX could eventually help make Musk a billionaire.
So, even if Musk’s Twitter takeover doesn’t turn the company into a formidable social media force that can challenge the likes of the Facebook and Instagram owner ID pads(FB)And snap chat(Explode, Explode) Or TikTok, Morgan Stanley could still benefit.
Anything the investment bank does to get ahead to stay in Musk’s blessing can be helpful, especially if the world’s richest person is seeking advice on further Tesla mergers, SpaceX’s IPO, The Boring Company, or any other whim that requires him to raise money. More cash strikes his imagination.