According to sources familiar with the subject, Elon Musk is in negotiations with huge financial organizations and extremely wealthy people about getting more finance for the $44 billion purchase of Twitter and using less of his own money in the transaction.
Since the topic is private, the sources requested anonymity.
Musk is the richest man on the planet, according to Forbes, with a net worth of $245 billion. However, the majority of his fortune is invested in Tesla Inc, his electric car company he heads. Furthermore, Musk revealed last week that he sold Tesla shares to the value of $8.5 billion after he agreed to purchase Twitter.
According to the sources, the additional financing, which might be in the form of ordinary or preferred equity, has the ability to decrease Elon’s $21 billion cash commitment and a margin loan guaranteed against his shares in Testa.
Musk has reportedly guaranteed several of his Tesla stock to banks in order to help fund the acquisition with a $12.5 billion margin loan.
Reuters reported that the banks that were on board with lending him loans worth $13 billion, premised on Twitter’s performance last month, hesitated at issuing extra debt for Musk’s acquisition due to the firm’s minimal cash flow.
According to one of the sources, Musk might try to reduce the magnitude of this margin loan in light of the recent investor interest in the financing deal.
Musk is in negotiations with big investors including hedge funds, private equity companies, and high-net-worth people about supplying preferred equity funding for the purchase, according to various sources. Preferred equity could pay a predetermined dividend from Twitter, similar to how a loan or bond does; however, it would increase in accordance with the firm’s equity value.
Furthermore, sources stated that Ares Management Corp and Apollo Global Management Inc are the two private equity companies in discussions to offer the funding.
According to the sources, Musk is debating whether or not to enlist the help of partners in writing the capital check necessary for the acquisition. Sources stated that Musk isn’t looking to increase his debt financing for this transaction right now.
Musk has stated that he will try to keep as many Twitter investors as possible once the firm goes private.
Elon Musk has been in negotiations with several of Twitter’s key shareholders regarding the idea of them rolling their position in the purchase instead of cashing out as per the sources. Another source stated that Jack Dorsey, existing board member and former Twitter CEO, is considering rolling his take.
As per the source, major institutional investors, including Fidelity, are considering rolling over its holdings.
Requests for a response from Musk, Fidelity, Dorsey, Ares, and Apollo went unanswered.
What About the Rally for Tesla Shares?
Tesla stock closed at $902.94 in New York on Monday, up 3.7 percent. The revelation, according to Dan Ives, the managing director of Wedbush Securities, eased investors’ fears that Elon Musk was depending on his share of Tesla stock too heavily to fund the Twitter acquisition.
Musk has chastised Twitter’s moderation practices, describing himself as a “free speech absolutist.” He wants Twitter’s algorithm for highlighting tweets to be public knowledge, and he is against giving advertising firms too much power on the network.
Investors read the news of the new financing conversations, making it somewhat more probable that the acquisition will close. Twitter stock was trading over 0.2 percent at $49.14 on Monday in New York, which is not far off from the acquisition price of $54.20 per share.
Given Musk’s history of backtracking, investors are concerned about whether he will finish the Twitter acquisition. In April 2022, he backed out of a seat on Twitter’s board of directors at the last minute. Musk tweeted in 2018 that he had “funding secured” for the $72 billion agreement to take Tesla private; however, he never followed through.
If Musk walks away, he’ll have to pay a termination fee of $1 billion to Twitter, and the social media firm could sue Elon to force him to finish the arrangement.
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