Elon Musk is reportedly in talks with investment firms and high-net-worth individuals about financing his takeover of Twitter Inc (NYSE: TWTR) in a way that would tie up less of his wealth in the deal — one prominent analyst sees this as a positive catalyst for the electric vehicle maker’s stock.
The financing, which is still being discussed, could take the form of preferred or common equity and reduce Musk’s $21 billion cash outlay to secure the social media platform, according to Reuters, citing people familiar with the matter.
According to Reuters, private equity firms, hedge funds, and high-net-worth individuals are in talks with Musk about providing preferred equity financing.
According to the sources, the firms involved in the discussions are Apollo Global Management (NYSE: APO) and Ares Management Corporation (NYSE: ARES). According to Reuters, large investors such as Fidelity are also involved.
According to one of the people who spoke with Reuters, Musk has also been talking to major Twitter shareholders about rolling their stake rather than cashing out. One such shareholder, according to the source, is former Twitter CEO Jack Dorsey.
Why It’s Important:
According to Reuters, Musk is unsure whether his partners will contribute funds to his takeover of Twitter, but he is not seeking additional debt for the transaction.
Musk sold 9.6 million Tesla shares worth $8.5 billion last month. Investors anticipated that he would sell stock to fund the Twitter acquisition.
According to Wedbush analyst Dan Ives on Twitter, if Musk’s move to seek partners for Twitter financing materializes, it could be a positive for Tesla stock.
If Musk decides not to buy Twitter, he will have to pay $1 billion to exit the $44 billion deal, according to a Twitter filing with the US Securities and Exchange Commission.
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