Elon Musk’s bankers face the dilemma of the year

Since his shock announcement of the takeover of Twitter for 44 billion dollars (42.15 billion euros), Elon Musk maintains the vagueness around the future of this operation.

After having bought 9.2% of the social network in April, then gathered the necessary financing to buy the rest, supported in particular by certain large investors with sometimes rather questionable relations, and finally obtained the unanimous agreement of the board of directors of the platform , the billionaire keeps emphasizing that he can cancel the operation if he wishes.

His main argument: a disagreement about the number of bots present on the platform. Pretext or not, he claimed that Twitter’s non-cooperation could legally allow him to stop the takeover. The firm ended up executing by transmitting to the boss of Tesla an astronomical amount of data, the exploitation of which can also raise questions.

In the middle of this imbroglio are six banks (Morgan Stanley, Goldman Sachs, JP Morgan Chase, Bank of America, Barclays and Allen & Company), who are working on the transaction and now find themselves in a huge dilemma.

Heads I lose, tails you win

On the one hand, Musk is one of their clients, and not the least. The acquisition of one of the largest social networks in the world by the richest man in the world therefore naturally attracted enormous political and media attention.

The banks involved therefore have an interest in giving their client the best possible advice and helping him to cancel his proposal by limiting the damage if that is what he wishes, or if the takeover complicates his other activities too much, in particular those of Tesla.

On the other hand, in the event of an agreement between Musk and Twitter, these six banking establishments would share, according to the Financial Times, 191.5 million dollars (182.8 million euros), i.e. the highest bank charges. of the year and the third largest since 2020.

However, if the deal is canceled, this tidy sum would be considerably reduced. Still according to the Financial Times, Goldman Sachs would receive only 15 million dollars out of the 80 initially planned and JP Morgan would only obtain 5 of the 53 million intended for it, to cite only these two examples.

This gigantic transaction was supposed to be the culmination of a disappointing year for Wall Street banks. However, the loan made is already less interesting than what was on the program.

Because, originally, Musk also wanted to take out a margin loan of $12.5 billion, secured by its Tesla shares. Only, thanks to funding recovered from billionaire Larry Ellison, the crypto platform Binance and the company Sequoia Capital, this credit was halved, then simply canceled. Taking a promise from Elon Musk at face value is rarely a good idea.

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