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Tesla CEO Elon Musk. Picture: BRENDAN MCDERMID/REUTERS
Tesla CEO Elon Musk. Picture: BRENDAN MCDERMID/REUTERS

Apollo Global Management is in talks to lead a preferred financing for Elon Musk’s proposed buyout of Twitter, according to people with knowledge of the deal. 

The funding, arranged by Morgan Stanley, will exceed $1bn 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 on Tuesday at $47.26 apiece, with traders growing more sceptical that Musk, the CEO of Tesla, will complete the purchase at the $54.20 offer price. 

That’s despite Musk revealing last week he’s getting $7.1bn in equity commitments from investors including Larry Ellison, Sequoia Capital and Qatar. He persuaded Saudi Prince Alwaleed bin Talal to roll his $1.9bn of Twitter stock into the privatised 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 $27.25bn in equity to fund the $44bn 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. Marc Rowan, Apollo’s CEO, touted the attractiveness of hybrid investments in a recent interview with David Rubenstein, saying it offers the best risk versus reward in markets.

“You are stepping back from the publicly traded markets, so are getting the benefit of illiquidity and getting downside protection because the world is uncertain from a geopolitical and an economic point of view,” he told Rubenstein’s Bloomberg Wealth television show.

Musk recently boosted his cash position by selling Tesla stock — about $8.5bn 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 $231.8bn,  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.

Bloomberg

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