Tesla stock plunge wipes $128 billion of value as Twitter deal sparks fears

Tesla shares tumbled as investors continued to digest the aftermath of Twitter’s acceptance of CEO Elon Musk’s $44 billion bid for the social media giant, adding to already steep losses caused by impending interest rate hikes by the Federal Reserve.

Main facts

  • Tesla shares fell 12% to $876, sending the stock down more than 28% from its all-time high in November and wiping out $25 billion from Elon Musk’s fortune and $128 billion from the market capitalization of Tesla, which now stands at $906 billion.
  • “Tesla shareholders cannot be happy that Elon Musk has to divert even more attention from his victory in the race for electric vehicles,” wrote Edward Moya, an analyst at Oanda, in a comment sent by e-mail. mail, echoing concerns from Vital Knowledge Media’s Adam Crisafulli, who also attributed the plunge to investor concerns over how Elon Musk will fund his Twitter bid.
  • In a document filed last week, Elon Musk revealed he secured $46.5 billion in funding for the Twitter deal, including more than $20 billion in loans from Morgan Stanley and $21 billion in funding. shares, which makes it very likely that some Tesla shares will need to be sold and some pledged for the deal to work.
  • As the stock plunged when Twitter confirmed the receipt of the unsolicited takeover proposal, Wells Fargo analyst Colin Langan warned Tesla shareholders that the risk of Elon Musk selling even more shares could make pressure on the stock, as was the case when the 50-year-old announced sales (which finally took place) at the end of last year.
  • Colin Langan also said that Elon Musk’s involvement with Twitter could be a distraction for a CEO with an already busy schedule, and recalled that two recently opened factories in Berlin and Austin, Texas, are intended to double the company’s global production capacity.
  • While it’s not yet clear what role Elon Musk will play at Twitter, he pledged in a statement to work with the company and “make Twitter better than ever” through many initiatives, including new features, opening up its algorithms, reducing the scope of messages, and authenticating all humans.

Important figure

$243 billion. This is the amount of the fortune of Elon Musk, who owns 21% of Tesla, but who gave more than half of his shares as collateral for a loan, according to Forbes. The PayPal co-founder grew up in South Africa before going to the University of Pennsylvania.

Surprising fact

Despite the fall in Tesla shares, Elon Musk remains the richest person in the world, by far. Amazon founder and chairman Jeff Bezos comes closest, with a net worth of $166 billion.

The context

“We don’t believe this offer from Twitter will result in a material sale of Elon Musk’s Tesla shares,” Wedbush analyst Dan Ives said in a note, postulating that the shares would instead be pledged for loans. . “We see no risk that this Twitter situation will impact Tesla’s stock or Elon Musk’s attention.”

Tesla shares have racked up big losses since Elon Musk suggested he would sell about 10% of his stake in November, sparking concerns among investors about how stock prices would hold up amid the sell-off. massive. The stock fell 26% when Elon Musk sold its shares in the weeks that followed, but recouped almost all of the losses after the billionaire said he had “almost finished” selling in late December. However, the broader market has largely struggled since then, as the Fed hikes rates and withdraws economic support to ease decades-high inflation. The tech-heavy Nasdaq has fallen 20% this year and plunged back into bear market territory.

Even though its stock is struggling, Tesla reported the most profitable quarter in its history last week, with first-quarter profit of $3.3 billion, fueled by record deliveries.

Article translated from Forbes US – Author: Jonathan Ponciano

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