Lazard's $400m Mistake

etx's picture
Rank: Senior Gorilla | 852

I read an interesting article on Reuters this morning. In regards to Tesla's deal with SolarCity, Evercore was Tesla's sole advisor, with Lazard working on the SolarCity side.

Evercore will earn an estimated $15-20 million in buy-side advisory fees, according to the consultant Freeman & Co., while Lazard will earn between $20-25 million.

According to a regulatory filing by Tesla on Wednesday, Lazard made an error in its analysis which discounted the value of SolarCity by $400 million. An analysis by Lazard for SolarCity that indicated an equity value of between $14.75 and $34.00 per share was wrong because it double-counted some of the company's projected indebtedness

While the purchase price was within the valuation range that Lazard came up with for SolarCity even after accounting for the miscalculation, the error illustrates how even leading investment banks can make mistakes on some of the highest-profile deals.

SolarCity and Tesla agreed however that the error would not change their view of the deal, according to the filing. The purchase price, to be paid with Tesla stock, equated to $25.37 per share.

Lazard, SolarCity and Tesla declined to comment.

What do you think will happen to the Lazard team working on the deal in terms of bonuses etc? I'm just a tad curious.