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 US$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 US$47.26 apiece, with traders growing more skeptical that Musk, the chief executive officer of Tesla Inc., will complete the purchase at the US$54.20 offer price. 

That’s despite Musk revealing last week he’s getting US$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 US$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 US$27.25 billion in equity to fund the US$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 US$8.5 billion in the latest round -- and he’s already amassed 9.6 per cent of Twitter’s outstanding shares.

Musk is the world’s richest person with a net worth of US$231.8 billion, according to the Bloomberg Billionaires Index, but much of that fortune is illiquid. Tesla’s stock has tumbled 26 per cent 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.