Sources: Tesla CEO Elon Musk's efforts to raise new money for Twitter acquisition on hold due to uncertainty Tesla CEO Elon Musk's efforts to arrange new financing for a Twitter merger deal have been put on hold due to uncertainty surrounding the deal, people familiar with the matter reportedly said. Musk has been threatening to back out of the deal unless Twitter provides him with data to support the company's estimate that fake or spam accounts make up less than 5 percent of its user base. Musk has reportedly been in discussions to arrange $2-3 billion in preferred stock financing from a group of private equity firms led by Apollo Global Management, and sources said those conversations will be put on hold until the prospects for a takeover deal are clear.
Musk's attempt to raise external funding to reduce the use of personal funds for the Twitter acquisition has been put on hold because of uncertainty related to the deal, media said Tuesday, June 7, citing people familiar with the matter. He previously had discussions with a number of private equity firms led by Apollo Global Management Inc to have those institutions provide financing in the form of $2 billion to $3 billion in preferred stock, and those negotiations are now on hold and will not resume until the prospect of an acquisition is clear.
People familiar with the matter also said that uncertainty about the deal has also affected banks that had previously committed to providing $13 billion in debt financing. While still prepared to provide a syndicated loan, the banks plan to wait until the deal process is clear to start before acting. Banks believe that investors will not be willing to buy financing-related credit debt as long as there is still uncertainty. And the bank found that Musk's tweet-related public comments did not help the acquisition deal, hoping he would help the bank underwrite the bonds by making a presentation to investors.
The news comes just a day after Musk made a threat to potentially abandon the acquisition. In a letter to Twitter made public on Monday, Musk demanded data and information about spam and fake accounts, saying that Twitter's refusal to provide information about spam accounts violated the merger agreement. Some analysts interpreted the move as a negotiating tactic by Musk to get a lower deal price.
So far, Musk has had to pay $33.5 billion in cash in addition to bank financing to acquire Twitter. He has limited personal liquidity, and the media estimates that there is $218 billion of Musk's money tied to his Tesla holdings.
As early as April 25 of this year, more than ten days after the launch of the poison pill plan to defend against a hostile takeover, the Twitter board announced that it accepted Musk's offer to buy Twitter at a valuation of $44 billion, a big change in attitude behind which Musk received credit for $46.5 billion in financing commitments.
The announcement of the acquisition agreement showed that Musk would get about $13 billion in financing from financial institutions like Morgan Stanley, another $12.5 billion from mortgages on his Tesla stock, and a $21 billion commitment to Twitter that would come from his "direct or indirect" equity holdings.
Filed with regulators in early May, Musk was backed by the Oracle founder, Sequoia, Coin and other investors to raise a combined $7.14 billion in new financing, increasing the size of his committed equity financing from $21 billion to $27.25 billion, and reducing the loan he pledged on Tesla stock from $12.5 billion to $6.25 billion.
Another regulatory filing in late May showed that Musk took out an additional $6.25 billion in margin loans, thereby increasing his total equity commitment to acquire Twitter to $33.5 billion without having to pledge Tesla stock.