Elon Musk Seeks to Scrap Tesla Margin Loan With New Twitter Funding
Elon Musk is in talks to raise enough equity and preferred financing for his proposed buyout of Twitter Inc. to eliminate the need for any margin loan linked to his Tesla Inc. shares, according to people with knowledge of the matter.
The billionaire’s advisers, led by Morgan Stanley, have begun soliciting interest from potential investors for as much as $6 billion in preferred equity financing, the people said, asking not to be named discussing a private transaction.
Musk, 50, had originally teed up a $12.5 billion margin loan as part of his $44 billion deal to buy Twitter. That was halved to $6.25 billion after he disclosed $7.1 billion in equity commitments from investors including Larry Ellison, Sequoia Capital, Qatar Holding and Saudi Prince Alwaleed bin Talal, with the latter rolling his Twitter stock into the deal.
Since then, Musk has received commitments for another $1 billion in equity, and is in talks for more, one of the people said.
That additional equity, on top of the preferred financing, would be enough to erase the margin loan, cutting the risk of the deal for both Musk and his lenders.
It would also alleviate pressure on Tesla’s stock, which is the cornerstone of Musk’s $216 billion fortune, the world’s largest. The electric carmaker has tumbled more than 25% since he agreed to purchase Twitter, stoking concerns among investors that he may sell even more than the $8.5 billion he’s already disposed of to fund the buyout.
The preferred equity may have a 20-year maturity and include a feature allowing interest to be paid in kind at a rate of 14%, the people said. That interest rate would be increased by 75 basis points in the seventh, eight and ninth year, they added. The financing may alternatively be
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