Musk seeks to put in less money in new Twitter deal financing

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 Inc
and tying up less of his wealth in the deal, people
familiar with the matter said.

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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 Inc, the electric carmaker he leads. Last week, Musk disclosed he 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 contributionthat 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 baulked 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. He
may seek to trim the size of the margin loan based on the new
investor interest in the deal financing, one of the sources
said.

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.

Apollo Global Management Inc and Ares Management
Corp are among the private equity firms that have been
in talks about providing the financing, the sources added.

Musk is still deciding whether he will have partners team up
with him in writing the equity check needed for the deal, the
sources said. Musk is not seeking to take on more debt for the
Twitter deal currently, the sources added.

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.

Large institutional investors, such as Fidelity, are also in
talks about rolling over their stake, according to the source.

Musk has tweeted that he would try to keep as many investors
in Twitter as possible as he takes the company private.

The sources requested anonymity because the matter is
confidential. Musk, Dorsey, Fidelity, Apollo and Ares did not
immediately respond to requests for comment.

Investors have been fretting over whether Musk will complete
the Twitter deal given that he has backtracked in the past. In
April, he decided at the last minute not to take up a seat on
Twitter’s board. In 2018, Musk tweeted that there was “fundingsecured” for a $72 billion deal to take Tesla private but did
not move ahead with an offer.

Twitter shares rose 1.2% to $49.63 in afternoon trading in
New York on Monday, closer to the $54.20 per share acquisition
price, as investors interpreted the news on the new financing as
more certainty for the deal closing.

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
criticised Twitter’s moderation policies. He wants Twitter’s
algorithm for prioritising tweets to be public and objects to
giving too much power on the service to corporations that
advertise.