The head of Elon Musk’s family office has approached investors who helped the billionaire buy Twitter for $44 billion in October in an attempt to raise new money as the social media company continues to bleed cash and faces heavy interest payments on its debts.
Jared Birchall, a former Morgan Stanley banker, approached Twitter shareholders on Thursday afternoon, according to two people familiar with the matter. He offered new shares of the company at $54.20 – the same price Musk paid to take the company private.
Its note to investors, first reported by Semafor, said Twitter was “pleased to announce a follow-on equity offering for common stock at the original price and terms,” according to a person who received it.
The memo didn’t specify how much Twitter planned to raise in the new fundraising effort, but said it aimed to wrap up the fundraiser by the end of the year.
“It was all haphazard and crude,” said investment adviser Ross Gerber, who invested in the Twitter deal in October and confirmed he had received the latest offer. “They do it because they have no more money. I do not think so [Musk] I expected such a big drop in income.
A second person whose company received the offer said Musk indicated the new capital would be used to fund an expansion of his business, including a ’round of hires’ of programmers to create a ‘great app’ which could process payments, among other services.
Birchal and Musk planned to hold a series of calls with Twitter investors who want to increase their stake in the company, the person said.
Musk bought Twitter after a dramatic six-month legal row, financing the acquisition with about $13 billion in debt and outside equity of about $7 billion.
But it has been scrambling to cut costs since then, including laying off around half of Twitter’s staff, after advertisers fled the platform over concerns about its content moderation strategy, threatening its advertising business. $5 billion a year.
A number of high-profile investors have written big checks to help fund Musk’s takeover on Twitter in exchange for stakes, including Sequoia Capital, Andreessen Horowitz, Oracle co-founder Larry Ellison and the exchange of Binance cryptocurrency.
Banks such as Morgan Stanley, Bank of America and Barclays face significant losses on the financial package they provided. Twitter, which made a loss of about $221 million in 2021, must pay annual interest of about $1 billion on the loan.
Between Monday and Wednesday, Musk sold $3.6 billion in You’re here, the electric vehicle manufacturer he founded and directs. It was his fourth sale of Tesla stock this year, bringing his total disposals to nearly $40 billion.
The sales took place despite Musk saying there would be “no further TSLA sales” to support the Twitter deal in April.
On Tuesday, Musk tweeted, “At the risk of stating the obvious, beware of debt in turbulent macro conditions, especially when the Fed continues to hike rates.”
The banks that underwrote Twitter’s buyout debt are desperate to sell the subprime loans to credit investors and get them off their balance sheets. However, large discounts demanded by investors would result in losses that could easily exceed $1 billion, people with knowledge of the matter told the Financial Times.
Musk could not be reached for comment on Friday. Twitter did not respond to a request for comment.
Additional reporting by Hannah Murphy and Ortenca Aliaj