Tesla Inc (NASDAQ: TSLA) CEO Elon Musk is reportedly in discussions with investment firms and high-net individuals about financing his takeover of Twitter Inc (NYSE: TWTR) in such a manner that less of his wealth would be tied up in the deal — one prominent analyst sees this as a positive catalyst for the electric vehicle maker's stock.
What Happened: The financing, under discussion, could take the shape of preferred or common equity and reduce the $21 billion cash that Musk would need to cough up to secure the social media platform, reported Reuters, citing people familiar with the matter.
Reuters’ sources said that private equity firms, hedge funds, and high-net-worth individuals are in talks with Musk that are centered around making available preferred equity financing.
The sources named Apollo Global Management (NYSE: APO) and Ares Management Corporation (NYSE: ARES) as the firms involved in the discussions. Large investors such as Fidelity are also involved, according to Reuters.
Musk has also been talking to major Twitter shareholders about rolling their stake instead of cashing out, one of the persons told Reuters. The source named former Twitter CEO Jack Dorsey as one such shareholder.
See Also: How To Buy Twitter (TWTR) Shares
Why It Matters: Musk is undecided if his partners will shore up the funds with him for Twitter’s takeover, but he is not seeking more debt for the deal, according to Reuters.
Last month, Musk sold 9.6 million shares of Tesla worth $8.5 billion. Investors were expecting him to sell stock to finance the Twitter acquisition.
Wedbush analyst Dan Ives said on Twitter that if Musk’s move to seek partners for Twitter financing materializes it could be a positive for Tesla stock.
Tesla shares up on Reuters article saying Musk seeking partners for financing on Twitter deal. This is big if it materializes as we believe the Twitter deal has been a $100+ per share overhang on Tesla’s stock due to the Musk financing concerns/shares tied up.
— Dan Ives (@DivesTech) May 2, 2022
Should Musk change his mind about buying Twitter, he will have to shell out $1 billion to exit the $44 billion purchase deal, according to a Twitter filing with the U.S. Securities and Exchange Commission.
Price Action: On Tuesday, Twitter shares closed 0.3% higher at $49.18 and rose 0.1% in extended trading. On the same day, Tesla shares rose 3.7% in the regular session to $902.94 and gained another 0.45% in the after-hours session, according to data from Benzinga Pro.
Read Next: Elon Musk Plans Crusade On Twitter Spam And Bots — New Data Reveals The Size Of His Problem
