Elon Musk, the CEO of Tesla, Inc. (NASDAQ: TSLA), is currently in the process of acquiring the majority of Twitter’s shares. He has been reported to be in deliberation with high-net individuals and investment firms regarding financing his buy-out of Twitter, Inc. (NYSE: TWTR) in such a way that would require less of his wealth in the deal. The consensus among analysts considers this a positive catalyst for Tesla, Inc.

Prior to this, Musk has already secured financing deals primarily in the form of debt. However, according to reports from Reuters, citing people familiar with the case, the financing under discussion could take the shape of preferred or common equity and reduce the $21 billion cash that Musk would need to provide from his own wallet to secure the influential social media platform.

Multiple Hedge Funds, Private Equity Firms, and High-Net-Worth Individuals are in talks with Musk. The deliberation is centered around making available preferred equity financing, Reuters said. Among the sources named; Ares Management Corporation (NYSE: ARES) and Apollo Global Management (NYSE: APO) as the firms involved in the deliberations. In addition, large and prominent institutional investors such as Fidelity are also involved, according to Reuters.

On top of Institutional Investors, Elon Musk has also been talking to crucial Twitter Shareholders about “rolling their stake” instead of cashing out. The source mentioned the former Twitter CEO Jack Dorsey as one such shareholder.

Why does Elon Musk seek an alternative financing route?

Reports revealed that Musk is undecided if his partners will provide enough funds for Twitter’s takeover, but he is not seeking more debt for the deal, according to Reuters. In April, Musk sold more than 9.6 million shares of Tesla, worth approximately $8.5 billion. Analysts and investors expected him to sell a portion of the stock to finance the Twitter acquisition.

Can Elon Musk back out of the deal? Yes he can. And some analysts are speculating that if Elon doesn’t get the right alternative financing, then he may back out of the deal and keep the cash from selling his Tesla Stock.

What if Elon Musk does not follow through with the acquisition?

According to a Twitter filing with the U.S. Securities and Exchange Commission, if Musk changes his mind about buying Twitter, he will have to shell out $1 billion to exit the $44 billion purchase deal.

Price Action Analysis

On the 4th of April, following Elon Musk’s SEC announcement of having a 9.2% stake in Twitter. The stock closed the following day with a 27% gain. Twitter’s price fluctuation has been erratic yet shows resilience as it closed at $48.87 yesterday, the 3rd of May. Until the deal is finalized, speculation fuels the stock movement.

On the other hand, after the Twitter announcement, Tesla, Inc. (TSLA) rallied and closed at more than 5.5% on the 4th of April. However, unlike Twitter, it did not sustain its upward momentum and fell sharply. It closed at $909.25 yesterday, the 3rd of May, falling about 20% from the announcement date.