Apollo Global Management Inc. is in talks to lead a preferred financing for Elon Musk’s proposed buyout of Twitter Inc., according to people with knowledge of the deal.
The funding, arranged by Morgan Stanley, will exceed $1 billion and may include Sixth Street Partners, among other firms, the people said. Apollo, Sixth Street and Morgan Stanley declined to comment.
Shares of Twitter closed Tuesday at $47.26 apiece, with traders growing more skeptical that Musk, the chief executive officer of Tesla Inc., will complete the purchase at the $54.20 offer price.
That’s despite Musk revealing last week he’s getting $7.1 billion in equity commitments from investors including Larry Ellison, Sequoia Capital and Qatar. He persuaded Saudi Prince Alwaleed bin Talal to roll his $1.9 billion of Twitter stock into the privatized company and is seeking to do the same with Twitter co-founder Jack Dorsey.
It’s not clear how the preferred equity might change the existing financing proposal, which requires Musk and his partners to contribute $27.25 billion in equity to fund the $44 billion purchase, with the rest coming from junk-rated debt and a margin loan tied to Musk’s Tesla stock.
Preferred equity is a hybrid of debt and equity capital that sits above common equity in the capital structure. Some preferred equity is convertible into common shares at a pre-agreed price.
Musk recently boosted his cash position by selling Tesla stock -- about $8.5 billion in the latest round -- and he’s already amassed 9.6% of Twitter’s outstanding shares.
Musk is the world’s richest person with a net worth of $231.8 billion, according to the Bloomberg Billionaires Index, but much of that fortune is illiquid. Tesla’s stock has tumbled 26% since Musk announced his desire to buy Twitter, stoking concerns among investors that he may need to sell or pledge considerable amounts of stock to fund the bid.
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