Consulting Firm Sues Elon Musk’s Twitter Claiming He Wasn’t Paid

The blockbuster tech deal that every adviser on Wall Street claimed to be a part of turned out not to have been as lucrative for at least one consulting firm that worked on it.

That company, Innisfree M&A Incorporated, sued Twitter in New York State Supreme Court on Friday, seeking approximately $1.9 million in what it says were unpaid invoices after advising the company on its sale to Elon Musk last year. Twitter hired Innisfree last May to help it contact 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 for an amount of at least $1,902,788.03,” the lawsuit states.

Twitter and an attorney 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 incurred significant debt for the deal, which it must repay with interest payments, although it has also been struggling with declining sales. So to make the company’s finances work, 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 facing legal action in London for non-payment of rent.

A private jet company sued Twitter last year, claiming it failed to pay $197,725 for flights flown by a former executive when the deal was struck.

Mr. Musk also avoided making payments to some of Twitter’s former executives, who were due to receive multimillion-dollar payouts when he fired them. And the severance package offered to terminated employees was less than promised by Twitter’s former management team, prompting many of those former employees to file lawsuits.

Companies like Innisfree play a crucial, albeit behind-the-scenes role in mergers and acquisitions, often acting as an intermediary between shareholders and management. Innisfree has helped advise Twitter executives and sent a slew 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 September 26. Around October 28, Twitter said the invoice had been “successfully processed”. When Innisfree did not receive payment, it followed up twice in December, the complaint states. The consultancy, through its attorney, sent a letter to Twitter on Dec. 23 demanding payment, but did not hear back from the company.

Other Wall Street firms also may not have benefited from Mr. Musk’s deal for Twitter, which was the biggest leveraged buyout for a tech company. Investment banks Morgan Stanley, Bank of America and Barclays have collectively lent about $13 billion to fund Mr. Musk’s acquisition. But they committed those funds before inflation, rising interest rates and an attempt by Mr. Musk to break 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 transactions, and they prefer to sell any debt they end up holding in case borrowers can’t repay. Morgan Stanley wrote down $356 million on its leveraged loans last month, meaning the market value of that debt has fallen since the deals were funded.