New York
CNN Enterprise
—
Even the world’s richest particular person wants monetary recommendation. That’s nice information for Morgan Stanley, the funding financial institution of selection for Elon Musk.
Morgan Stanley
(MS) suggested the Tesla
(TSLA) CEO on his $44 billion acquisition of Twitter
(TWTR). The financial institution additionally helped safe $25.5 billion in funding for the deal, together with $12.5 billion in loans that use Musk’s Tesla
(TSLA) inventory as collateral. That ought to result in profitable charges and curiosity earnings for Morgan Stanley
(MS).
Funding banks normally get a few 1% to three% minimize of the worth of a merger deal, which is break up amongst all of the banks concerned. Based mostly on the $44 billion buy worth, that works out to a spread of $440 million to $1.3 billion.
So Morgan Stanley might be taking a look at taking in tens — and even lots of — of tens of millions of {dollars} from advising Musk, plus the Wall Road bragging rights.
Morgan Stanley is likely one of the world’s preeminent monetary corporations. In accordance with so-called league tables tracked by the Monetary Occasions, the financial institution raked within the second-largest quantity of charges from funding banking within the first quarter. Its $852 million in charges to date this 12 months trailed solely Goldman Sachs, and was up 87% from the primary quarter of 2021.
Morgan Stanley stated in its first-quarter earnings report that advisory income for mergers practically doubled from a 12 months in the past. However total funding banking income was held again by a slowdown in preliminary public choices and company bond gross sales throughout a rocky first three months for the broader market.
The financial institution had no remark in regards to the firm’s work for Musk or Tesla.
However it shouldn’t be an enormous shock that Musk is working with Morgan Stanley. In spite of everything, he has a greater than decade’s lengthy relationship with the corporate. And the financial institution was considered one of 4 underwriters for Tesla’s 2010 IPO, together with Goldman Sachs
(GS), JPMorgan Chase
(JPM) and Deutsche Financial institution
(DB).
Morgan Stanley’s auto analyst, Adam Jonas, is likely one of the greatest Tesla bulls on Wall Road. Jonas at the moment has a “purchase” score on Tesla inventory and a $1,300 worth goal, 30% above the present inventory worth of roughly $1,000 a share.
Jonas has additionally just lately written constructive experiences in regards to the prospects for 2 of Musk’s multi-billion greenback privately held firms, SpaceX and The Boring Firm. Jonas even recommended in 2017 that Tesla and SpaceX ought to merge, and extra just lately predicted that SpaceX might finally assist make Musk a trillionaire.
So even when Musk’s takeover of Twitter doesn’t flip the corporate right into a social media juggernaut that may problem the likes of Fb and Instagram proprietor Meta Platforms
(FB), Snapchat
(SNAP) or TikTok, Morgan Stanley might nonetheless profit.
Something the funding financial institution does shifting ahead to remain in Musk’s good graces might be helpful, particularly if the world’s wealthiest particular person seeks recommendation on extra mergers for Tesla, an IPO for SpaceX or The Boring Firm or no matter different whim requiring him to boost additional cash strikes his fancy.
