Latest News by Industry
• Morgan Stanley is leading Musk’s advisers to raise capital
• Musk has received commitments for another $1 billion in equity recently
Elon Musk is in talks with investors to raise as much as $6 billion in preferred equity financing for his proposed buyout of Twitter Inc (NYSE: TWTR) to eliminate the need for a margin loan linked to his Tesla Inc (NASDAQ: TSLA) shares, Bloomberg reported on Thursday citing people familiar with the matter.
Morgan Stanley is leading the billionaire’s advisers to raise the equity and preferred financing.
Musk initially secured a $12.5 billion margin loan against his Tesla stock from Morgan Stanley to help fund his purchase.
But he reduced the loan to $6.25 billion earlier this month after securing $7.1 billion in equity commitments from investors including Larry Ellison, Sequoia Capital, Qatar Holding and Saudi Prince Alwaleed bin Talal.
The report said that Musk has received commitments for another $1 billion in equity and is in talks for more.
Firms including Apollo Global Management Inc (NYSE: APO) and Sixth Street Partners are already discussing participating in the preferred financing, Bloomberg reported.
Dropping market value
Shares of Twitter have fallen drastically below Musk’s purchase price.
The social media company on Thursday closed at $45.08 apiece, which is way below the offer price of $54.20 and has fallen about 12% since reaching its high for the year in late April.
The drop in share price reflects a $9 billion difference in market value from Musk’s purchase price.
Since Monday, Twitter shares have been tumbling after the short-seller Hindenburg Research warned that Musk’s $44-billion could get repriced lower if the billionaire plans to walk away from the deal.
“Musk holds all the cards here,” the firm said in a report. “If Elon Musk’s bid for Twitter disappeared tomorrow, Twitter’s equity would fall by 50% from current levels. Consequently, we see a significant risk that the deal gets repriced lower.”
Picture Credit: CNN
ALSO READ:
Twitter CEO fires two leaders, hiring paused to cut costs amid Musk takeover
Musk says he would reverse Twitter ban on Donald Trump after deal closes