Taking over Twitter may be good for Elon Musk, but it hasn’t been good for Tesla’s shares.
One day after Twitter announced it had accepted Musk’s $44 billion takeover bid, Tesla shares sank 12.2%, wiping out more than $125 billion off the electric vehicle maker’s market value.
The falls come as Wall Street fretted about how the deal could impact the electric vehicle maker and its stock price.
When Musk announced he had secured the money to finance the transaction, he said he would cover $21 billion himself, with banks helping finance the other half.
What remains unclear is how he will come up with that money — whether he will sell some of the Tesla shares he owns, borrow against them, bring in additional investors, or all three.
There is also growing concern about whether owning Twitter would bring him into conflict over free speech with the government in China, a key market for Tesla where the auto maker also has significant production.
On top of that, there is the risk Musk could become distracted by his latest acquisition.
Musk is the CEO of Tesla and Space-X and is involved with other business ventures such as Neuralink, which develops brain implant technology, as well as The Boring Company, which makes tunnels.
Musk, who is the world’s richest man, has a net worth of $257 billion, according to the Bloomberg Billionaires Index But two-thirds of his wealth is in Telsa stock.
If Musk does offload some of those holdings, it could drive Tesla’s share price down further. This is something the company warned investors about in its latest annual report, filed in February with the U.S. Securities and Exchange Commission.
“If Elon Musk were forced to sell shares of our common stock that he has pledged to secure certain personal loan obligations, such shares could cause our stock price to decline,” the company wrote.
It also could result in a hefty tax bill for Musk himself, who sold billions of dollars worth of Tesla shares last year. sending them sharply lower, as he engaged in heated back-and-forth with Democratic lawmakers about how billionaires should be taxed.
Last week, Tesla reported record earnings for the first quarter of 2022, despite high prices and supply-chain challenges. The company also presented a production forecast that impressed Wall Street.