Musk's Twitter Threats Irks Financiers

Elon Musk's efforts to secure new financing that will limit his cash contribution to his $44 billion acquisition of Twitter Inc. have been halted due to the deal's uncertainty, according to people familiar with the matter, Krystal Hu and Greg Roumeliotis reported for Reuters.

Photo Insert: Even the banks have found Elon Musk's disparaging public comments about the company unhelpful.

Musk has threatened to walk away from the deal unless Twitter provides him with data to back up its estimate that false or spam accounts account for less than 5% of its user base. Musk's lawyers sent a letter to Twitter on Monday warning that unless more information is provided, he may walk away.

However, according to the tech research firm Spark Toro, 70% of Musk's Twitter followers are bots, spam, or fake accounts, which is far too high compared to the 41 percent for accounts with 90 million to 120 million followers.

Musk must pay $33.5 billion in cash to fund the transaction after arranging debt financing to cover the remainder. His liquidity is limited because his wealth, valued at $218 billion by Forbes, is largely tied to the shares of Tesla Inc., the electric car maker he leads.

According to the report, Musk is in talks to arrange $2 billion to $3 billion in preferred equity financing from a group of private equity firms led by Apollo Global Management Inc., which would reduce his cash contribution even further.

Preferred equity would pay a fixed dividend from Twitter, similar to how a bond or loan pays regular interest but would appreciate in line with the company's equity value.

Unfortunately, these discussions are now on hold until there is clarity about the acquisition's future. Banks do not believe credit investors will buy the debt as long as there is uncertainty.

The banks have also found Musk's disparaging public comments about the company unhelpful, and they were hoping that by now, he would be assisting them with investor presentations to syndicate the deal.

The pause in financing activities is the first clear indication that Musk's threats are interfering with steps that would help the deal close. Twitter has insisted thus far that Musk has been performing his obligation under their contract, including helping to secure regulatory approval for the deal.

Musk sold $8.5 billion worth of Tesla shares in April after he signed his deal to buy Twitter, and it is not clear how much cash he has available to meet his obligation. He has raised $7.1 billion from a group of equity co-investors to reduce his contribution.

Musk also sought to reduce this exposure further by arranging a risky $12.5 billion margin loan tied to the shares of Tesla, but then scrapped it last month.

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