The new funding could reduce the $21 billion cash deposit Musk has pledged for the deal, as well as a margin loan he secured against his Tesla shares.
The new funding could reduce the $21 billion cash deposit Musk has pledged for the deal, as well as a margin loan he secured against his Tesla shares.
Elon Musk is in talks with big investment firms and wealthy individuals to provide more funding for his $44 billion acquisition of Twitter Inc. and tie less of his wealth into the deal, people familiar with the matter said.
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Musk is the richest person in the world, with Forbes estimating his net worth at around $245 billion. Most of his wealth, however, is tied up in the shares of Tesla Inc, the electric car maker he runs. Last week, Musk announced that he had sold $8.5 billion worth of Tesla stock after agreeing to buy Twitter.
The new funding, which could come in the form of preferred or common stock, could reduce the $21 billion in cash Musk has pledged for the deal, as well as a margin loan he’s secured against his Tesla shares has, the sources said.
The banks, which last month agreed to inject $13 billion in loans based on Twitter’s deal, have been reluctant to offer more debt to acquire Musk given the San Francisco-based company’s limited cash flow , Reuters reported last month.
Musk has also pledged some of his Tesla stock to banks to arrange a $12.5 billion margin loan to fund the deal. He may try to slash the amount of the margin loan based on new investors’ interest in financing the deal, one of the sources said.
Big investors such as private equity firms, hedge funds and high net worth individuals are in talks with Musk about providing preferential equity financing for the acquisition, the sources said. Preferred stock would pay a fixed dividend from Twitter, just as a bond or loan would pay periodic interest but rise in line with the company’s equity value.
Apollo Global Management Inc and Ares Management Corp are among the private equity firms in talks to provide the funding, the sources added.
Musk is yet to determine if he will have partners working with him to write the equity check required for the deal, the sources said. Musk is not currently seeking any further debt for the Twitter deal, the sources added.
Musk has also spoken to some of Twitter’s major shareholders about the possibility of them putting their stake in the deal rather than cashing it out, one of the sources said. Former Twitter chief executive and current board member Jack Dorsey is considering rolling his take, a source added.
According to the source, large institutional investors like Fidelity are also in talks to extend their stakes.
Musk tweeted that if he went private, he would try to keep as many investors on Twitter as possible.
The sources asked for anonymity as the matter is confidential. Musk, Dorsey, Fidelity, Apollo and Ares did not immediately respond to requests for comment.
Investors have worried about whether Musk will finalize the Twitter deal, given his history of backtracking. In April, he made a last-minute decision not to take a seat on the Twitter board. In 2018, Musk tweeted that funding was “secured” for a $72 billion deal to privatize Tesla, but made no offer.
Twitter shares rose 1.2% to $49.63 in afternoon trade in New York on Monday, closer to the purchase price of $54.20 a share, as investors took the news of the new financing as more certainty for the closing of the Transaction interpreted.
Musk would have to pay Twitter a $1 billion termination fee if he walks away, and the social media company could also sue him to close the deal.
Musk, who describes himself as a free speech absolutist, has criticized Twitter’s moderation policy. He wants Twitter’s tweet prioritization algorithm to be public and opposes giving too much power over the service to companies that advertise.
