A week after Elon Musk finalized a $44bn deal to purchase Twitter, the billionaire is working to secure outside funding for the acquisition that would tie up less of his personal fortune.
The Tesla CEO disclosed last week he had sold $8.5bn worth of stock following his agreement to buy Twitter. Additional financing, which could come in the form of preferred or common equity, could reduce the $21bn cash contribution that Musk has committed to the deal as well as a margin loan he secured against his Tesla shares, sources familiar with the matter told Reuters.
Musk has also pledged some of his Tesla shares to banks to arrange a $12.5bn 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.
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.
Musk would have to pay a $1bn termination fee to Twitter if he walked away, and the social media company could also sue him to complete the deal.
Twitter shares rose 1.2% to $49.63 in afternoon trading in New York on Monday, closer to the $54.20 a share acquisition price, as investors interpreted the news on the new financing as more certainty for the deal closing.
On Monday, the social media company said in a filing that false or spam accounts represented fewer than 5% of its monetizable daily active users during the first quarter.
Reuters contributed to this report
