JAKARTA - Elon Musk is reportedly in talks with major investment firms and high-net-worth individuals about seeking more financing for his $44 billion acquisition of Twitter Inc. The Tesla CEO hopes to save less of his fortune to fulfill a deal with a shareholder on Twitter.
Last week, Musk revealed he had sold $8.5 billion of Tesla shares following his deal to buy Twitter.
The new financing, which could come in the form of preferred stock or joint equity, could reduce the $21 billion cash contribution Musk has pledged to the deal as well as a margin loan he's secured from his Tesla stock.
According to a Reuters report, banks that last month agreed to provide a $13 billion loan based on Twitter's business have refused to offer more debt for the Musk acquisition. This is considering the cash flow of the San Francisco-based company is limited.
Musk has also pledged some of his Tesla stock to banks to secure a $12.5 billion margin loan to help fund a deal with Twitter. Elon Musk is likely seeking to cut the size of margin loans based on new investor interest in financing the deal.
According to a source, major investors such as private equity firms, hedge funds, and high net worth individuals are in talks with Musk about providing equity financing options for the acquisition. Preferred equity will pay a fixed dividend from Twitter, in the same way that bonds or loans pay regular interest but will be priced in line with the company's equity value.
Apollo Global Management Inc and Ares Management Corp are said to be among the private equity firms that have been in talks about providing financing.
Musk is still deciding whether he will have a partner work with him on writing the equity checks needed for the deal. Musk is reportedly not trying to take on more debt for the current Twitter deal.
"Musk has also been in talks with some of Twitter's major shareholders about the possibility of them putting their shares into the deal rather than cashing in on it," one of the sources said. Even former Twitter Chief Executive and current board member, Jack Dorsey, is examining whether he will make the decision to jointly support Musk's funding.
Big institutional investors, such as Fidelity, are also in talks about rolling over their shares.
Musk has tweeted that he will try to keep as many investors on Twitter as possible while he takes the company private.
The source requested anonymity as this matter is confidential. Musk, Dorsey, Fidelity, Apollo and Ares did not respond to requests for comment from Reuters on this report.
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Tesla shares ended trading Monday, May 2 in New York, up 3.7% at $902.94 per share. Wedbush Securities managing director Dan Ives said the news helped ease investor concerns that Musk was relying too much on his Tesla stock to finance the Twitter deal.
"This is huge if it materializes as we believe the Twitter deal has become a $100+ per share hanging on Tesla stock due to Musk's financing issues," tweeted Ives.
Investors have been concerned about whether Musk will finalize the Twitter deal given he has backed out in the past. In April, he decided at the last minute not to sit on Twitter's board. In 2018, Musk tweeted that there was "guaranteed funding" for a $72 billion deal to take Tesla private but did not proceed with the offer.
Musk will have to pay a $1 billion termination fee to Twitter if he leaves, and social media companies 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 to prioritize tweets going public and refuses to give too much power to the service to companies that advertise.
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