Elon Musk's decision to pull a $44 billion deal for Twitter could see Wall Street's top banks lose hundreds of millions of dollars, scuppering one of 2022's biggest pay days.

• Elon Musk's decision to kill the $44 billion Twitter deal means banks could lose a "nine-figure" payday.
• Musk's and Twitter's financial advisors could pocket up to $192 million if the deal closes.

Elon Musk's 'will-he-won't-he' dance to buy Twitter took a turn on Friday after the billionaire said he intended to terminate his agreement to acquire the social-media company due to it disclosing "false and misleading" numbers on fake user accounts.

Twitter has often stated that roughly 5% of users on its platforms are spam accounts. But Musk — through a letter filed by his lawyers at Skadden to the US Securities and Exchange Commission on Friday — is convinced it's much higher than 5%, and used this belief as a weapon to kill the $44 billion deal.

His decision could see a number of banks lose out on what promises to be one of Wall Street's most lucrative paydays.

Morgan Stanley — Musk's trusted financial advisor — alongside Goldman Sachs, JPMorgan, Bank of America, Barclays, and Allen & Co could pocket almost $192 million in fees, the largest earnings for an M&A deal this year, and the third-biggest since 2020, according to data from Refinitiv that was cited by the Financial Times.

While the investment banks will claim some cash for their advisory services, much of the fees can be collected only if the deal closes. Bankers, therefore, are keen to see Musk and Twitter kiss and make up, Insider has learned.

Morgan Stanley, BofA, Barclays, MUFG, BNP Paribas, Mizuho, and Société Générale also underwrote about $13 billion in loans to support the acquisition for Musk. Much of this debt was due to be taken off banks' balance sheets and syndicated to third-party investors in the form of high-yield bonds or leveraged loans.

Should the deal be formally called off by both parties, this could scupper a collective "nine-figure" payday for all the banks involved, one banker whose firm is involved in the financing told Insider.

Another banker whose firm also participated in the debt financing said this "isn't over yet," in regards to the acquisition. He expects a drawn-out legal process to follow, and reckons it's one that Musk could lose.

The billionaire faces a legal nightmare. Twitter is vowing to sue Musk and force a close on the deal. Musk needs to argue that there has been a material adverse effect on the transaction to void the Twitter purchase, but courts rarely rule in favor of apprehensive buyers.

Musk would owe Twitter $1 billion as a termination fee for killing the deal. If the court finds that other conditions relevant to closing the deal — including having the financing in place — are met, Twitter can push Musk toward completing the transaction.

'When you're the richest man in the world, you can mess around with anyone'

It took only six days — including a long weekend — for Morgan Stanley to corral the syndicate of banks for Musk's $44 billion takeover of Twitter.

Musk agreed to a deal without looking at Twitter's financials, and shrugged off the company's lack of cash flow, moves that compelled some lenders to pass on participating in the financing, bankers told Insider.

But when a man with Musk's money comes along, investment banks will move mountains to give him what he wants, especially when there's a chance this work could land these banks Musk's next big deal.

He's a billionaire. He effectively controls the $780 billion electric vehicle maker Tesla, which is an active participant in the capital markets. And he owns SpaceX. Should the space company go public one day, that's a deal every bank on Wall Street will want to be part of.

"Here's the thing, when you're the richest man in the world, you can mess around with anyone and people will come back to you," the first senior banker said. I'm sure the banks will moan about it, but they'll probably be there for the next deal. That's the nature of the trade."

Now, with Musk and Twitter likely destined for a court date, bankers are hoping the deal crosses the finish line. It'll be a handsome fee in an otherwise poor year for M&A and capital-markets dealmaking.