The blockbuster technology deal that every adviser on Wall Street clamored to be a part of has proved not to have been so lucrative for at least one advisory firm that worked on it.
That firm, Innisfree M&A Incorporated, sued Twitter on Friday in New York State Supreme Court, seeking about $1.9 million in what it says are unpaid bills after it advised the company on its sale to Elon Musk last year. Twitter hired Innisfree last May to help it reach out to its shareholders about the $44 billion deal. When Mr. Musk completed the acquisition of Twitter in October, the bill became his.
“As of December 23, 2022, Twitter remains in default of its obligations to Innisfree under the agreement in an amount of not less than $1,902,788.03,” the lawsuit says.
Twitter and a lawyer for Innisfree did not immediately respond to requests for comment.
Innisfree’s lawsuit is the latest sign that Twitter has stopped paying some of its vendors, advisers and other service providers since Mr. Musk took over the company. Twitter took on a large amount of debt for the deal, which it must repay along with interest payments, even as it has also grappled with sliding sales. So to make the company’s finances work, Mr. Musk has slashed costs.
Last month, the company that owns Twitter’s San Francisco headquarters accused Twitter of refusing to make more than $3 million in rent payments. Twitter also faces legal proceedings in London over a failure to pay rent.
A private jet company sued Twitter last year, claiming it had failed to pay $197,725 for flights taken by a former executive during the closing of the deal.
Mr. Musk has also avoided making payments to some of Twitter’s former executives, who were set to receive multimillion-dollar payouts when he fired them. And the severance offered to laid-off employees was lower than what had been promised by Twitter’s previous management team, prompting suits by many of those former employees.
Firms like Innisfree play a crucial, but behind-the-scenes, role in mergers and acquisitions, often acting as a go-between with shareholders and executives. Innisfree helped advise Twitter executives and sent out a flurry of communications to shareholders about a vote last September on approving the sale to Mr. Musk.
In its lawsuit, Innisfree says it first sent an invoice to Twitter around Sept. 26. Around Oct. 28, Twitter said the invoice had been “successfully processed.” When Innisfree did not receive payment, it followed up twice in December, the complaint says. The advisory firm, through its lawyer, sent a letter to Twitter on Dec. 23 demanding payment but has not heard back from the company.
Other Wall Street firms also may not have profited from Mr. Musk’s deal for Twitter, which was the largest leveraged buyout for a technology company. The investment banks Morgan Stanley, Bank of America and Barclays collectively lent about $13 billion to finance Mr. Musk’s acquisition. But they committed those funds before inflation, rising interest rates and an attempt by Mr. Musk to break up the deal. They have since been unable to sell that debt, which is on their balance sheets.
Investment banks make money from the fees they charge to arrange these deals, and they prefer to sell any debt they end up holding in case borrowers cannot repay. Morgan Stanley last month wrote down $356 million on its leveraged loans, meaning the market value of that debt has dropped since the deals were financed.