Elon Musk seeks to sell Twitter shares in search of new funds

The head of Elon Musk’s family office has approached investors who helped the billionaire buy Twitter for $44bn in October to try and raise new funds 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’s shareholders on Thursday afternoon, according to two people familiar with the matter. He offered new shares in the company at $54.20 — the same price Musk paid to take the company private.

His note to investors, first reported by Semafor, said Twitter was “pleased to announce a follow-on equity offering for common shares at the original price and terms”, according to one person who received it.

The note did not specify how much Twitter expected to raise in the new fundraising effort, but said it aimed to close the fundraising by the end of the year.

“Everything has been done haphazardly and roughly,” said investment adviser Ross Gerber, who invested in the Twitter deal in October and confirmed he had received the latest offer. “They’re doing it because they’re out of money. I don’t think [Musk] expected such a big drop in revenue.”

A second person whose firm received the offer said Musk had indicated the new capital would be used to fund an expansion of its business, including a “hiring spree” of programmers to build a “super app” that could process payments, among other services.

Birchall 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, funding the acquisition with about $13bn of debt and outside equity capital of about $7bn.

But he has been racing to cut costs since then, including by laying off about half of Twitter’s staff, after advertisers fled the platform over concerns about his content moderation strategy, threatening its $5bn-a-year advertising business.

A number of high-profile investors wrote big cheques to help fund Musk’s Twitter buyout in exchange for equity stakes, including Sequoia Capital, Andreessen Horowitz, Oracle co-founder Larry Ellison and cryptocurrency exchange Binance.

Banks including Morgan Stanley, Bank of America and Barclays face significant losses on the financing package they provided. Twitter, which made a loss of about $221mn in 2021, has to pay annual interest of about $1bn on the loan.

Between Monday and Wednesday, Musk sold $3.6bn in Tesla, the electric vehicle maker he founded and leads. It was his fourth sale of Tesla stock this year, bringing his total disposals to almost $40bn.

The sales came despite Musk saying there would be “no further TSLA sales” to support the Twitter deal back in April.

On Tuesday, Musk tweeted: “At risk of stating obvious, beware of debt in turbulent macroeconomic conditions, especially when Fed keeps raising rates.”

The banks that underwrote the Twitter buyout debt are desperate to sell the high-risk loans on to credit investors and move it off their balance sheets. However, significant discounts demanded by investors would result in losses that could easily top $1bn, people with knowledge of the matter have 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