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Hi, Aaron Weinman here, back from vacation. And Elon Musk was kind enough to wait until I returned to call off his $44 billion pursuit of Twitter.
Let's unpack how this impacts the Wall Street banks that expected a "nine-figure" payday from the deal.
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1. Musk's decision to terminate a $44 billion deal to buy Twitter could scupper one of Wall Street's best-ever paydays. The transaction would've been the third-biggest fee pool for a merger or acquisition since 2020, according to data from Refinitiv. It's a hammer blow in what's been a poor year for dealmaking across the capital markets.
Musk said he terminated the agreement to buy Twitter because of "false and misleading" numbers of fake user accounts. Musk has questioned Twitter's claims that it has about 5% of spam accounts on its platform, but it's going to be a tall order to prove this in court.
Bankers are hopeful a court will force Musk to close the deal, otherwise they could miss out on more than $190 million in fees.
That's not including the fees the underwriting banks — Morgan Stanley, BofA, Barclays, MUFG, BNP Paribas, Mizuho, and Société Générale — stand to pocket from selling about $13 billion in debt in the capital markets in the form of high-yield bonds or leveraged loans.
These banks needed just six days to iron out a deal for Musk and Twitter, and did it without Twitter's financials. Some even passed on participating in the financing because they were skeptical over Twitter's ability to make money.
But the allure of a billionaire, and the deluge of business he provides Wall Street was enough to convince these lenders to do a deal.
"When you're the richest man in the world, you can mess around with anyone and people will come back to you. I'm sure the banks will moan about it, but they'll probably be there for the next deal. That's the nature of the trade," one banker told Insider.
With Musk and Twitter destined for a fiery legal battle, bankers are hoping the deal crosses the finish line.
Read more for what this means for Wall Street here.
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