Tuesday, May 03, 2022
Elon Musk is in talks with large investment firms and high net-worth individuals about taking on more financing for his $44 billion acquisition of Twitter and tying up less of his wealth in the deal, people familiar with the matter said.
Musk is the world's richest person, with Forbes estimating his net worth at about $245 billion. Yet most of his wealth is tied up in the shares of Tesla, the electric car maker he leads. Last week, Musk disclosed he had sold $8.5 billion worth of Tesla stock following his agreement to buy Twitter.
The new financing, which could come in the form of preferred or common equity, could reduce the $21 billion cash contribution that Musk has committed to the deal as well as a margin loan he secured against his Tesla shares, the sources said.
The banks that agreed last month to provide $13 billion in loans based on Twitter's business balked at offering more debt for Musk's acquisition given the San Francisco-based company's limited cash flow, Reuters reported last month.
Musk has also pledged some of his Tesla shares to banks to arrange a $12.5 billion margin loan to help fund the deal. One of the sources said that he may seek to trim the size of the margin loan based on the new investor interest in the deal financing.
Major investors such as private equity firms, hedge funds, and high net-worth individuals are in talks with Musk about providing preferred equity financing for the acquisition, the sources said. Preferred equity would pay a fixed dividend from Twitter, in the same way that a bond or a loan pays regular interest but would appreciate in line with the equity value of the company.
Musk has also been in talks with some of Twitter's major shareholders about the possibility of them rolling their stake into the deal rather than cashing out, one of the sources said. Former Twitter Chief Executive and current board member Jack Dorsey is examining whether he will roll his take, one source added.
Musk has tweeted that he would try to keep as many investors in Twitter as possible as he takes the company private.
Musk would have to pay a $1 billion termination fee to Twitter if he walked away, and the social media company could also sue him to complete the deal.
Musk, who calls himself a free speech absolutist, has criticized Twitter's moderation policies. He wants Twitter's algorithm for prioritizing tweets to be public and objects to giving too much power over the service to corporations that advertise.