Elon Musk is negotiating with major investment firms and wealthy individuals to secure additional financing to fund his $44 billion acquisition of Twitter (NYSE:TWTR) and use less of his capital in the transaction, according to Reuters.
Musk, the world’s richest man with an estimated worth of roughly $245 billion, disclosed last week that he offloaded $8.5 billion worth of Tesla (NASDAQ:TSLA) shares after Twitter accepted his takeover bid.
Given that most of his wealth is tied up in Tesla stock, Musk is now looking to use less of his money to fund the deal and rather secure the financing elsewhere. The new funding could come in the form of preferred or common equity and may lower the $21 billion cash contribution that the Tesla CEO has committed to the acquisition and a margin loan he secured against Tesla stock.
Last month, the investment firms that agreed to provide $13 billion in loans were reluctant to offer more debt for the deal due to Twitter’s limited cash flow.
Furthermore, Musk pledged a portion of his Tesla shares to investment firms in a bid to secure a $12 billion margin loan for the deal. Now, the billionaire might reduce that margin loan after new investors showed interest in funding the acquisition of Twitter.
Multiple hedge funds, high net worth individuals and private equity firms are looking to offer preferred equity financing to help Musk fund the deal. Just like a bond or a loan pays regular interest, preferred equity would pay a determined dividend from Twitter but would also increase in line with the equity value of the social media company.
By Senad Karaahmetovic