• Tesla stock likely to suffer from Musk’s Twitter takeover
• Sale of Tesla shares necessary for financing
• Experts worry about Musk’s time management
Tesla boss Elon Musk can buy the short message service Twitter. The board of directors approved his offer of $54.20 per share on Monday, the microblogging service is thus valued at around 43 billion US dollars. As already announced last week, the multi-billionaire has decided to take over Raised $46.5 billion: These are approximately $25 billion in loan commitments, with a further $21 billion to be contributed through shares. Now enough Twitter shareholders need to sell Musk their stakes for him to take control. However, some skepticism still seems to prevail among them, because the price of the Twitter share is still below the offer price. According to experts, skepticism is also the order of the day for shareholders in Elon Musk’s electric car manufacturer Tesla. They fear that both Tesla’s stock price and business could suffer as a result of the Twitter acquisition.
Musk’s Twitter purchase could weigh on Tesla stock price
According to “Forbes”, Elon Musk is the richest person in the world with a fortune of almost 270 billion US dollars (as of April 26, 2022), but this consists mainly of shares in the electric car manufacturer Tesla and the space company SpaceX. Musk has had to sell Tesla shares in the past to pay off his tax debts. “Musk is rich, but he doesn’t have unlimited funds, and for his multi-billion dollar deal to work, he would likely need to sell some of his Tesla stock to fund the deal,” said analysts at Pensions & Investment Research Consultants (Pirc) according to “This is Money”. In fact, Musk’s plan apparently envisages raising $21 billion through stock sales – a move that other analysts like Wells Fargo’s Colin Langan also expected. According to Bloomberg, Langan warned in a research note that this could put significant pressure on Tesla’s share price. The paper has had a weak run of late anyway: Since the beginning of the year, the Tesla share certificate has lost around 5.5 percent in value (as of the closing price on April 25, 2022). Only that Price boost after the latest quarterly figures it is thanks to the fact that the minus is currently not even greater.
According to “Reuters”, Tesla shares should also come into play as a hedge for the loan commitments. As the news agency writes, Tesla executives are allowed to deposit their shares as collateral for loans, but the maximum loan amount may not exceed 25 percent of the value of the deposited shares. If Musk pledged all of his Tesla shares as collateral, he could borrow $42.5 billion, according to Reuters. Since the Tesla boss said he had over $25 billion in loan commitments, he may have pledged more than half of his Tesla stock as collateral. “He’s potentially positioning himself for huge liability in the future,” former SEC adviser Howard Fischer warned Reuters.
Twitter could distract Elon Musk too much from working at Tesla
But even apart from these more direct effects on the Tesla share price, the takeover of Twitter should also have direct consequences for the Tesla company – which should subsequently also affect the share price. Because numerous experts fear that Elon Musk could be distracted too much from his other tasks by his plans for Twitter.
“Elon Musk’s offer to buy Twitter is the latest development in a week-long saga that is simply a distraction from the many challenges Tesla itself is facing,” David Trainer, CEO of research firm New Constructs, wrote in an email , which is available to “CNN” and “Bloomberg”. In fact, there is currently a lot to do at the e-car manufacturer: production has to be ramped up in the new gigafactories in Texas and Grünheide – and especially for the cars from the latter the first customers were already complaining about numerous shortcomings. In addition, Tesla is facing more and more competition in the e-mobility sector – both from newcomers and from established car companies. “Tesla faces serious competition in the electric vehicle segment. The big automakers are catching up and producing innovative electric vehicles,” continued Trainer. “As the CEO of a trillion dollar company, Elon Musk should focus on Tesla and not waste time acquiring and running a $43 billion company,” Trainer concluded.
“Elon is distracted. He’s got a lot of things going on. He’s involved in a lot of different things,” noted analyst Gene Munster told Reuters, warning of a “one- to three-month headwind for Tesla shares.” . Musk is not only involved in all product decisions at Tesla – according to “Bloomberg” he once described himself as a “nano manager” who does not hand over decisions – but also at his other companies SpaceX, Neuralink and The Boring Company. In addition, he is sometimes heavily involved in the crypto sector and also works at Tesla on the Development of a humanoid robot named Optimus. In addition to all these projects, Twitter is another company that Musk has to lead – and apparently also wants to lead. Because he already expressed that he does not trust the current Twitter management. So after the purchase is complete, he will probably want to take the reins into his own hands. But Twitter is a full-fledged company — and the short messaging service is on a whole different level than many of Musk’s other companies. Twitter leadership would likely demand a lot of Elon Musk’s time – at Tesla’s expense.
“Musk is Tesla, and investors don’t want to see Tesla lose that leadership,” Roth Capital Partners’ Craig Irwin warned, according to Reuters. Because Tesla’s management team is thin: the company lacks a COO and otherwise only Andrew Baglino and Zachary Kirkhorn are listed on the website as members of the management board alongside Elon Musk. According to “This is Money”, the analysts at Pensions & Investment Research Consultants (Pirc) also see “this latest episode of the Elon Musk Show” and a possible distraction from working at Tesla as a risk for the electric car manufacturer’s shareholders. The fact that Tesla shareholders are not particularly enthusiastic about the fact that Elon Musk will soon be in charge of Twitter was also shown by the reaction of Tesla shares after it became known that the Twitter board of directors had given up its resistance: it fell on the corresponding day by 0.7 percent.
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