Twitter Inc may introduce slight fees for commercial and government users but Elon Musk insists the social media platform will always be free for casual users.
This, probably seen as a new measure to boost Twitter’s reach from “niche” to most Americans, came as the billionaire entrepreneur hold talks with large investment firms and high net-worth individuals about financing for his $44 billion acquisition of Twitter Inc in a bid to free his wealth in the deal.
“Twitter will always be free for casual users, but maybe a slight cost for commercial/government users,” Musk said in a tweet.
Twitter declined to comment when contacted by Reuters.
Tesla chief Musk has been suggesting a raft of changes to Twitter since last month. After adding the company to his cart recently, Musk said he wanted to enhance the platform with new features, make the algorithms open source to increase trust, defeat spam bots, and authenticate all humans.
Last month, even before reaching a deal with Twitter, Musk had suggested a few changes to the Twitter Blue premium subscription service, including slashing its price.
Earlier this week at the annual Met Gala in New York on Monday, Musk also said he would make Twitter transparent about how tweets are promoted or demoted and wanted its software to be publicly available for critique.
Musk is the world’s richest person, with Forbes estimating his net worth at about $245 billion. Yet most of his wealth is tied up in the shares of Tesla Inc, the electric car maker he leads. Last week, Musk disclosed he sold $8.5 billion worth of Tesla stock following his agreement to buy Twitter.
The new financing, which could come in the form of preferred or common equity, could reduce the $21 billion cash contribution that Musk has committed to the deal as well as a margin loan he secured against his Tesla shares, the sources said.
The banks that agreed last month to provide $13 billion in loans based on Twitter’s business baulked at offering more debt for Musk’s acquisition given the San Francisco-based company’s limited cash flow, Reuters reported last month.
Musk has also pledged some of his Tesla shares to banks to arrange a $12.5 billion margin loan to help fund baulked. He may seek to trim the size of the margin loan based on the new investor interest in the deal financing, one of the sources said.
Major investors such as private equity firms, hedge funds and high net-worth individuals are in talks with Musk about providing preferred equity financing for the acquisition, the sources said. Preferred equity would pay a fixed dividend from Twitter, in the same way, that a bond or a loan pays regular interest but would appreciate in line with the equity value of the company.
Apollo Global Management Inc and Ares Management Corp are among the private equity firms that have been in talks about providing the financing, the sources added.
Musk is still deciding whether he will have partners team up with him in writing the equity check needed for the deal, the sources said. Musk is not seeking to take on more debt for the Twitter deal currently, the sources added.
Musk has also been in talks with some of Twitter’s major shareholders about the possibility of them rolling their stake into the deal rather than cashing out, one of the sources said. Former Twitter Chief Executive and current board member Jack Dorsey are examining whether he will roll his take, one source added.
Large institutional investors, such as Fidelity, are also in talks about rolling over their stake, according to the source.
Musk has tweeted that he would try to keep as many investors are Twitter as possible as he takes the company private.
The sources requested anonymity because the matter is confidential. Musk, Dorsey, Fidelity, Apollo and Ares did not respond to Reuters’ requests for comment.
Tesla shares ended trading on Monday in New York up 3.7 per cent at $902.94. Wedbush Securities managing director Dan Ives said the news helped ease investors’ concerns that Musk was relying too much on his Tesla shares for the Twitter deal financing.
“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,” Ives tweeted.
Investors have been fretting over whether Musk will complete the Twitter deal given that he has backtracked in the past. In April, he decided at the last minute not to take up a seat on Twitter’s board. In 2018, Musk tweeted that there was “funding secured” for a $72 billion deal to take Tesla private but did not move ahead with an offer.
Twitter shares ended trading up 0.2 per cent at $49.14 in New York on Monday, closer to the $54.20 per share acquisition price, as investors interpreted the news on the new financing discussions as making it slightly more likely that the deal will close.
Musk would have to pay a $1 billion termination fee to Twitter if he walked away, and the social media company could also sue him to complete the deal.
Musk, who calls himself a free speech absolutist, has criticized Twitter’s moderation policies. He wants Twitter’s algorithm for prioritizing tweets to be public and objects to giving too much power on the service to corporations that advertise.
