Tesla Stock Plunge Wipes Out $114 Billion In Value As Twitter Deal Sparks Fears

Topline

Tesla shares collapsed Tuesday as investors continued to digest the implications of Twitter’s acceptance of CEO Elon Musk’s $44 billion bid for the social media giant, tacking onto already-staggering losses spurred by the Federal Reserve’s looming interest rate hikes.

“Tesla shareholders can’t be happy” about the Twitter deal potentially diverting Elon Musk’s … [+] attention, one analyst says.

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Key Facts

Tesla shares fell as much as 11% Tuesday to $890, pushing the stock down more than 28% from its all-time high in November and wiping nearly $25 billion from Musk’s fortune and $114 billion from Tesla’s market capitalization, which now stands at $920 billion.

“Tesla shareholders can’t be happy that Musk will have to divert even more attention away from winning the electric-vehicle race,” Oanda analyst Edward Moya wrote in emailed comments, echoing concerns from Vital Knowledge Media’s Adam Crisafulli, who also attributed the plunge to investor concerns about how Musk will finance his Twitter bid.

In a filing last week, Musk disclosed he’s secured $46.5 billion in financing for the Twitter deal, including more than $20 billion in loans from Morgan Stanley and another $21 billion in equity financing, making it very likely he’ll need to sell Tesla shares and pledge some as collateral to make the deal work.

As the stock plunged Thursday when Twitter confirmed receipt of the unsolicited takeover proposal, Wells Fargo analyst Colin Langan cautioned Tesla shareholders that the risk of Musk selling even more shares could put pressure on the stock, as it did when the 50-year-old teased sales (that did ultimately happen) late 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, that are designed to double the company’s global manufacturing capacity.

Though it’s still unclear what role Musk will take with Twitter, he pledged Monday in a statement to work with the company and “make Twitter better than ever” through a slew of initiatives including new product features, making its algorithms open source, curbing span and authenticating all humans.

Big Number

$243 billion. That’s how much Musk, who owns 21% of Tesla but has pledged more than half his stake as loan collateral, is worth, according to Forbes. The PayPal cofounder grew up in South Africa before attending the University of Pennsylvania as a transfer student.

Surprising Fact

Despite Tesla’s stock plunge on Tuesday, Musk remains the world’s richest person—by far. Amazon Founder and Chair Jeff Bezos comes closest, with a net worth of $166 billion.

Contra

“We do not believe this Twitter bid will result in a major sale of Musk’s Tesla shares,” Wedbush analyst Dan Ives said in a Friday note, positing shares would instead be pledged for loans. “We see no risk from this Twitter situation impacting shares of Tesla or Musk’s focus.”

Key Background

Shares of Tesla have racked up big losses since Musk suggested he would sell about 10% of his stake in November, sparking concerns among investors about how share prices would hold up amid the massive liquidation. The stock tumbled as much as 26% as Musk sold off shares in the following weeks but recouped nearly all the losses after the billionaire declared he was “almost done” with the sales in late December. However, the broader market has largely struggled since then as the Fed raises rates and unwinds economic support to ease decades-high inflation. The tech-heavy Nasdaq has plummeted 20% this year, plunging back into bear-market territory on Tuesday.

Tangent

Even though its stock has struggled, Tesla reported its most profitable quarter in company history last week, posting $3.3 billion in first-quarter income fueled by record deliveries.