Tesla CEO Elon Musk says he wants to expand the reach of Twitter beyond the current "niche" until most Americans use the social media platform.
But sources say he's now trying to change the financing terms of his expensive acquisition to tie up less of his own fortune, in a move that could cast further doubt over the takeover.
Musk has signed a deal to buy Twitter for $44 billion (€41.86 billion), raising questions among employees and the public about his strategy for running the social media network.
He told reporters gathered on the red carpet at the annual Met Gala in New York on Monday that an important measure of success would be whether Twitter could expand its audience significantly.
"Right now it's sort of niche. I want a much bigger percentage of the country to be on it, engaging in dialogue," said Musk, who attended the celebrity-studded event with his mother Maye Musk, a model.
Twitter has about 40 million daily active users in the United States, according to its most recent earnings report.
Musk said he wanted the platform to be "as broadly inclusive as possible, where ideally most of America is on it and talking," and as trusted as possible.
The billionaire 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 seeks change in funding of Twitter deal
But people familiar with the matter told Reuters Musk is now in talks with large investment firms and high net-worth individuals about taking on more financing for his acquisition of Twitter and using less of his own wealth in the deal.
Musk is the world's richest person, with Forbes estimating his net worth at about $245 billion (€233 billion). Yet most of his wealth is tied up in the shares of Tesla, the electric car maker he leads.
Last week, Musk disclosed he sold $8.5 billion (€8.1 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 (€19.9 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 (€12.4 billion) in loans based on Twitter's business balked 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 (€11.9 billion) margin loan to help fund the deal. 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 is 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 in 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 requests for comment.
Tesla shares jump
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 (€68.5 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 (€0.95 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 criticised Twitter's moderation policies. He wants Twitter's algorithm for prioritising tweets to be public and objects to giving too much power on the service to corporations that advertise.
Asked about a potential exodus of employees, Musk said on Monday: "It's a free country".
"Certainly if anyone doesn't feel comfortable with that, they will on their on accord go somewhere else. That's fine," he said.