Concern over Elon Musk’s Twitter takeover wipes $126bn off Tesla value | Tesla
Investors have wiped $126bn (£100bn) off Tesla’s value amid concern that Elon Musk may have to sell shares in the electric carmaker to fund his personal contribution to his $44bn acquisition of Twitter.
Tesla stock has been targeted despite the company not being involved in the bid but Musk, its chief executive and largest shareholder, is part-funding the Twitter deal with $21bn of his own equity and a further $12.5bn loan secured against his Tesla stake.
The 12.2% drop in Tesla’s shares on Tuesday equated to a $21bn drop in the value of his Tesla stake, equal to the cash stake he committed to the Twitter deal.
Dan Ives, an analyst at the financial firm Wedbush Securities, said worries about upcoming stock sales by Musk and the possibility he is becoming distracted by the Twitter venture are weighing on the electric carmaker’s shares. “This [is] causing a bear festival on the name,” he said.
Ed Moya, an analyst at the online trading platform Oanda, said: “If Tesla’s share price continues to remain in freefall that will jeopardise his financing.”
The share fall also took place against a backdrop of difficult trading for tech stocks. The Nasdaq closed at its lowest level since December 2020 on Tuesday, as investors worried about slowing global growth and more aggressive rate increases from the US Federal Reserve.
Twitter’s shares also slid on Tuesday, falling 3.9% to close at $49.68, even though Musk agreed to buy it on Monday for $54.20 a share in cash. The widening spread reflects investor concern that the precipitous decline in Tesla’s shares, from which Musk derives the majority of his $239bn fortune, could lead the world’s richest person to have second thoughts about the Twitter deal.
As part of the Tesla deal, Musk also took out a $12.5bn margin loan tied to his Tesla stock. He had already borrowed against about half of his Tesla shares.
The University of Maryland professor David Kirsch, whose research focuses on innovation and entrepreneurship, said investors started to worry about a “cascade of margin calls” on Musk’s loans.