Tesla CEO Elon Musk is reportedly speaking to large investment firms and other high net-worth individuals about contributing more money to his $44 billion deal to acquire Twitter. The firms and others Musk is speaking to could take on more financing in the deal, which would tie up less of his wealth in the acquisition, a new report from Reuters said.
Musk, who is the world’s richest individual, disclosed last week that he had sold around $8.5 billion in Tesla stock to fund the Twitter deal. Most of Musk’s incredible $245 billion net worth is tied up in his Tesla shares. After Musk offloaded some of his holdings last week, Tesla shares fell nearly 13 percent for the five-day stretch.
According to the Reuters report, new financing for the Twitter deal could come in the form of preferred or common equity and could reduce the $21 billion in cash Musk has committed to the $44 billion price tag and the margin loan he leveraged against his holdings, sources said. Musk also pledged some of the Tesla shares he owns to banks in return for a $12.5 billion margin loan, which helped fund the deal. The margin loan could be trimmed based on the new investor interest in the deal financing.
Musk is reportedly speaking to private equity firms, hedge funds, and other wealthy individuals about preferred equity financing for the acquisition, sources said. The preferred equity firms would pay a fixed dividend from Twitter, similar to the way a bond or loan pays regular interest. However, the interest would appreciate in line with the equity value of Twitter when Musk eventually assumes the company when the deal is finalized. One thing seems to be for sure: Musk is not willing to take on more debt for the Twitter deal at the current time.
Twitter’s major shareholders, including Jack Dorsey, who was CEO until last year and is a co-founder of the platform, have also been in contact with Musk about potentially rolling their stake into the deal rather than cashing out their holdings. Dorsey may roll his stake into the investment, as he spoke highly of Musk taking over Twitter and said, “Elon is the singular solution I trust” for improving the social network’s operations.
Fidelity is one of the large institutional investors Musk is in talks with, and also has had internal talks about rolling its stake.
Some investors have urged Musk to back out of the deal. Analysts bullish on Tesla have contributed last week’s losses to Musk’s $TSLA stake being trimmed due to the Twitter deal’s financing. “This is big if it materializes as we believe the Twitter deal has been a $100+ per share overhang on Tesla’s stock due to the Musk financing concerns/shares tied up,” Dan Ives of Wedbush said about Musk possibly looking for more investors.
Tesla shares up on Reuters article saying Musk seeking partners for financing on Twitter deal. This is big if it materializes as we believe the Twitter deal has been a $100+ per share overhang on Tesla’s stock due to the Musk financing concerns/shares tied up.
— Dan Ives (@DivesTech) May 2, 2022
Disclosure: Joey Klender is a TSLA Shareholder.
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