The Blockbuster technology deal every advisor on Wall Street wanted to be a part of hasn’t proven that lucrative for at least one consultancy that worked on it.
That firm, Innisfree M&A Incorporated, sued Twitter in the New York State Supreme Court on Friday, seeking about $1.9 million in unpaid bills after advising the company on its sale to Elon Musk last year. Twitter hired Innisfree last May to update its shareholders on the $44 billion deal. When Mr. Musk completed the takeover of Twitter Octoberthe bill became his.
“As of December 23, 2022, Twitter remains in default of at least $1,902,788.03 on its obligations to Innisfree under the Agreement,” the lawsuit reads.
Twitter and an attorney for Innisfree did not immediately respond to requests for comment.
The Innisfree lawsuit is the latest sign of this Twitter has stopped paying some of its suppliers, consultants and other service providers since Mr. Musk took over the company. Twitter has taken on a large amount of debt for the deal, which it has to repay along with interest payments, though it’s also struggling with sliding sales. To get the company’s finances working, Mr. Musk cut costs.
Last month, the company that owns Twitter’s San Francisco headquarters accused Twitter of refusing to pay more than $3 million in rent. Twitter is also threatened with court proceedings in London for non-payment of rent.
On Elon Musk’s Twitter
A private jet company sued Twitter last year, alleging it failed to pay $197,725 for flights taken by a former manager during the closing of the deal.
Mr. Musk has also avoided making payments to some of Twitter’s former executives who were due to receive multimillion-dollar payouts upon his firing. And the severance pay offered to laid-off employees was lower than what Twitter’s previous management team had promised, prompting many of those former employees to sue.
Firms like Innisfree play a crucial role in mergers and acquisitions, but behind the scenes, often acting as an intermediary between shareholders and executives. Innisfree helped advise Twitter executives and sent out a barrage of communications to shareholders about a vote last September in approving the sale to Mr. Musk.
In its lawsuit, Innisfree says it first billed Twitter around September 26. Around October 28, Twitter said the bill had been “successfully processed.” When Innisfree failed to receive payment, it went after it twice in December, the complaint said. The consulting firm, through its attorney, sent a letter to Twitter on Dec. 23 demanding payment, but has yet to hear a response from the firm.
Other Wall Street firms also may not have benefited from Mr. Musk’s deal for Twitter, which was the largest leveraged buyout for a tech company. Investment banks Morgan Stanley, Bank of America and Barclays have collectively borrowed around $13 billion to fund Mr Musk’s acquisition. But they pledged those funds ahead of inflation, rising interest rates and an attempt by Mr. Musk to end the deal. They haven’t been able to sell that debt that’s on their balance sheets since.
Investment banks make money from the fees they charge for conducting these deals, and they prefer to sell any debt they end up holding in case borrowers are unable to repay it. Morgan Stanley wrote up last month $356 million on its leveraged loans, meaning the market value of that debt has fallen since the deals were funded.
