Yeah I do really hope they study that side of it in business schools, to teach young business people and financiers about reputational risk and survivorship bias.

The involvement of the banks was always the confusing part of that deal. Really made me lose respect for their judgement.

> The involvement of the banks was always the confusing part of that deal. Really made me lose respect for their judgement.

Agreed, but to be fair the bank transactions were for debt rather than equity, so they will still end up ahead unless he really does drive the company to bankruptcy. That’s a real possibility, but they’re in better shape than the equity investors who have in one public case[1] already written down the investment 47%.

1: https://amp.theguardian.com/technology/2023/jul/18/twitter-i... (to save you a click: the investor is ARK)

I think that most of the equity investors in the takeover were motivated by politics rather than profit. It was more or less a PAC donation.

Don't the banks have Tesla stock as collateral?

Yeah but I think the debt risk was also way underestimated by the banks. I mean, bankruptcy risk was already pretty high for Twitter under its previous management. The terms of the debt seemed to me to reflect the acquisition reducing that risk, which was insane, and not just in hindsight. I don't think there's an explanation for it that doesn't involve the consumption of a large amount of kool-aid.

The investment bankers lost money even before the transaction completed. Interest rates rose while Musk dawdled and delayed buying Twitter, so the debt lost value (this is the same issue that drove some banks into bankruptcy is the debt they owned - bonds - devalued as interest rates rose). Ordinarily what the investment banks do is sell the debt and then enter into other deals, but with the Twitter deal they either have to take a bath and sell the debt at a loss or keep their money tied up as the debt gets paid off.