Elon Musk is looking for additional equity financing for his planned $44 billion purchase of Twitter, Reuters reported Monday, which could allow the billionaire to reduce the amount of his own money bound up in the acquisition without taking out more loans.
The Tesla CEO has approached investment firms including Apollo Global Management and Ares Management, Reuters reported, citing unnamed sources.
Musk is reportedly communicating with hedge funds, private equity companies and wealthy individuals about the possibility of obtaining equity financing.
Musk has offered to pay for Twitter through $21 billion in equity financing, in addition to a $12.5 billion margin loan against part of his 21% stake in Tesla and $13 billion in loans secured against Twitter assets.
Some banks that offered to support the acquisition with loans secured against Twitter have hesitated to provide additional debt financing, Reuters reported, noting that banks think Twitter did not generate sufficient cash flow to justify more loans.
However, Reuters said Musk is still deliberating on whether to enlist equity partners to help shoulder his own $21 billion share of funding for the Twitter acquisition.
Musk has also contacted major Twitter shareholders—including founder Jack Dorsey and Fidelity—about the prospect of holding onto their stakes in the company’s new structure, Reuters reported. Musk has previously suggested that he wants to retain as many existing Twitter shareholders as possible following the planned acquisition.
Musk disclosed April 4 he had acquired a 9.2% stake in Twitter, and later made his “best and final offer” to purchase the entire company for $54.20 per share The board first adopted a “poison pill” defense to deter a hostile takeover, but several days after Musk announced he had secured $46.5 billion in financing, the board accepted his offer. Despite setting a lofty goal of doubling revenue from 2021 to 2023, Twitter’s growth has lagged expectations. In the first quarter of 2022, Twitter’s revenue grew by 16% year-over-year to $1.2 billion. The company’s net income grew 655% year-over-year to $513 million, though this growth was due mostly to a gain of $970 million from the sale of the mobile ad network MoPub, and the company reported an operating loss of $128 million in the first quarter. Musk said he intends to boost Twitter’s profitability by offering new opportunities to monetize tweets and that he intends to cut costs by reducing Twitter board member salaries from roughly $290,000 to $0.
$253.6 billion. That’s how much Musk is worth, making him the world’s richest person, according to Forbes’ estimates. His stakes in Tesla and SpaceX account for most of his fortune.
“How Musk Already Owns Twitter: The 8 Top Tweets In The Past Week” (Forbes)