Shares of Tesla fell to their lowest level in 11 months on Tuesday after an analyst note forecasting declines added to a wave of concerns for the electric vehicle manufacturer as well as its leader Elon Musk, despite the fact that one of the company’s staunchest supporters has doubled down on his massive investment.
Tesla stock fell 7% to $628 on Tuesday, knocking the stock nearly 49% from its all-time high in November and wiping more than $30 billion off Tesla’s market capitalization, which fell to $650 billion. of dollars after a peak of more than 1,200 billion dollars.
Following the sharp decline, Daiwa analyst Jairam Nathan on Tuesday morning lowered his price target for Tesla shares to $800 from $1,150 advising customers of the Covid restrictions measures are in place in Shanghai, where the carmaker electric vehicles operates its so-called Gigafactory, as well as supply issues impacting its Austin and Berlin factories, which will further reduce expected profits.
Nathan predicts headwinds will drive deliveries this year down by 180,000 vehicles, meaning Tesla will deliver 1.2 million vehicles this year, down from 1.4 million units previously forecast.
The memo comes a day after Wedbush analyst Dan Ives warned that Twitter’s shareholders’ meeting this week is sure to blow the embers between Musk and the company’s board. social media, as Tesla investors fear the proposed takeover of Twitter will divert its attention from Tesla. “Tesla investors’ patience is running out,” Ives said of the resulting saga, with Musk suggesting he would cut his offer due to concerns about bots on Twitter, while the company’s board has stated that this would not alter the agreement.
“Tesla shareholders can’t be happy that Musk has to divert even more attention away from winning the EV race,” Oanda analyst Edward Moya said, echoing concerns from Vital Knowledge’s Adam Crisafulli. Media, which also attributed Tesla’s stock plunge to investor concerns over how Musk will fund his Twitter bid.
Despite the bearish trend, Ark Invest, the New York-based investment firm run by famed stock picker Cathie Wood, revealed it bought $10 million worth of Tesla shares on Tuesday, adding its stake for the first time. since February less than a week after the stock lost its top spot on flagship fund Ark to streaming giant Roku.
This circus show [de prise de contrle] “has been a major overhang on Tesla shares and has been a black eye for Musk so far,” Ives said Monday, adding that major market pressure for tech stocks has only added uncertainty. .
Tesla shares have racked up big losses since Musk suggested he would sell around 10% of his stake in November, with prices only crashing further as the broader market struggles with rising rates of interest. Adding to Tesla’s concerns, however, the worst supply chain crisis in modern history has threatened the company’s production in highly profitable China, Ives notes. The tech-heavy Nasdaq has fallen 29% this year. Tesla, meanwhile, plunged 47%.
Wells Fargo analyst Colin Langan has warned Tesla shareholders that the risk of Musk selling even more shares could put pressure on the stock, as it did when he announced sales (which finally took place) at the end of last year. Langan also said Musk’s involvement with Twitter could be a distraction for a CEO who already has a full plate, pointing to two recently opened factories in Berlin and Austin, Texas, designed to double the company’s global manufacturing capacity. business.
Twitter board says Elon Musk: We won’t change deal
As Elon Musk dithers on his commitment to buy Twitter for $44 billion, Twitter’s board said last week that it intended to go through with the merger deal at the cost of $44 billion. origin.
The board and Mr. Musk agreed to a $54.20 per share transaction. We believe this agreement is in the best interests of all shareholders. “We intend to complete the transaction and implement the merger agreement,” Twitter’s board said in a statement. Twitter also released a preliminary proxy statement outlining why shareholders should approve the deal.
“Twitter is committed to completing the transaction at the agreed price and terms as quickly as possible,” the company said in a press release announcing the proxy statement.
The sale agreement allows Twitter or Musk to end the deal and pay a $1 billion severance fee under certain circumstances. For example, Musk would have to pay the termination fee if it fails to complete the merger as required under and under the circumstances specified in the merger agreement.
However, Musk can’t necessarily get away with it based solely on his complaints about the number of spam accounts on the social network. Indeed, the merger agreement also includes a specific performance provision that allows Twitter to force Musk into the deal, according to the filing. This could mean that, if the deal goes to court, Twitter could get an order requiring Musk to complete the merger rather than win monetary compensation for any breaches of it.*
This provision is found in Article 9.9 of the Merger Agreement. If Twitter meets its obligations under the agreement, it will be entitled to specific performance or other equitable remedy to bring the capital investor [Musk] fund the equity financing, or enforce the equity investor’s obligation to directly fund the equity financing and consummate the Closing, states the agreement.
Twitter and Musk agreed that if either party failed to take steps to complete the deal, there would be irreparable harm for which damages, even if they were available, would not constitute an adequate remedy. Twitter or Musk would thereby be entitled to injunctive relief, specific performance, and other equitable relief to prevent violations of this Agreement and to specifically enforce the terms and provisions hereof, in addition to any other remedies to which they are entitled at law or in quit .
The deal also contains a non-disparagement clause that states Musk can tweet about the merger as long as those Tweets don’t disparage the company or any of its representatives, but Musk has repeatedly criticized Twitter and its representatives since signing. of the agreement.
Musk threatened to end deal over Twitter spam data
Musk said the deal can’t move forward until Twitter provides data on its estimate of spam accounts. He also said “renegotiating the deal at a lower price was not off the table”.
But Musk’s offer to buy Twitter waived commercial due diligence, and Twitter’s board relied on that commitment when it approved the deal and recommended shareholders vote in favour. Twitter’s proxy statement told shareholders that one of the reasons for approving the deal is the likelihood that other potential acquirers will need substantial due diligence, creating delay and risk in reaching signing. of such a potential transaction.
Musk says he believes at least 20% of Twitter accounts are fake or spam, while Twitter said in a Securities and Exchange Commission filing that less than 5% of monetizable daily active users (mDAUs) are spam or fake. These numbers are not mutually exclusive, as Musk seems to be talking about all accounts, while Twitter’s 5% stat refers to accounts that are logged in and can see ads every day. Still, Musk insisted Twitter’s data was wrong and dismissed the explanation offered by Twitter CEO Parag Agrawal.
Musk has produced no evidence
Bloomberg Opinion columnist Matt Levine blamed Musk for trying to stop the deal based on spam counts when no new spam count information was available since Twitter agreed to his company purchase offer*:
He has produced no evidence that Twitter’s estimates are wrong, and certainly not that they are materially wrong or made in bad faith. (Musk can only back out of the deal if Twitter’s statements are wrong in a way that would cause a “significant adverse effect” on Twitter, which is extremely unlikely.) His own supposed methodology for counting spambots is laughable. . Twitter CEO Parag Agrawal tweeted a thread yesterday explaining in general terms how Twitter estimates that fake accounts represent less than 5% of its number of active users and how this analysis cannot be easily replicated by entities. external (because they don’t know which accounts are real, and also because they don’t know which Twitter accounts count as daily active users). It seems clear that Agrawal’s thoughtful answer is fundamentally correct. Musk responded with a poo emoji.
More importantly, nothing has changed regarding the bot issue since Musk signed the merger agreement. Twitter released the same qualified estimate that less than 5% of monetizable accounts are fake over the past eight years. Musk was aware of these estimates and refused to do any non-public due diligence before signing the merger agreement. He was aware of the spambot problem before signing the merger agreement, as we know because he talked about it constantly, including when announcing the merger agreement. If he didn’t want to buy Twitter because there are spambots, he shouldn’t have signed a contract to buy Twitter. No new information has been revealed about spam bots in the last three weeks.
It’s more likely that Musk is trying to change the deal’s price for direct market reasons amid tough times for Tesla and other stocks, but that’s very clearly not allowed by the government. Merger Deal He Signed: Public company merger deals allocate large market risk to the buyer, and he can’t get out just because the stock has gone down,” Levine wrote.
Twitter’s stock price was just over $35 at the time of this writing.
Sources: NASDAQ, Twitter Board Statement, Merger Agreement