Tesla Inc lost $126 billion in value amid investor concerns that Chief Executive Elon Musk may have to sell shares to fund his $21 billion equity contribution to his $44 billion buyout of Twitter Inc. Tesla is not involved in the Twitter deal, yet its shares have been targeted by speculators after Musk declined to disclose publicly where his cash for the acquisition is coming from. The 12.2% drop in Tesla’s shares equated to a $21 billion drop in the value of his Tesla stake.
Wedbush Securities analyst Daniel Ives said that worries about upcoming stock sales by Musk and the possibility that he is becoming distracted by Twitter weighed on Tesla shares. To be sure, Tesla’s share plunge came against a challenging backdrop for many technology-related stocks. The Nasdaq closed at its lowest level since December 2020, as investors worried about slowing global growth and more aggressive rate hikes from the U.S. Federal Reserve.
Twitter’s shares also slid, falling 3.9% to close at $49.68 even though Musk agreed to buy it for $54.20 per share in cash. The widening spread reflects investor concern that the precipitous decline in Tesla’s shares, from which Musk derives the majority of his $239 billion fortune, could lead the world’s richest person to have second thoughts about the Twitter deal. OANDA senior market analyst Ed Moya said that if Tesla’s share price continues to remain in freefall that will jeopardize his financing.
As part of the Tesla deal, Musk also took out a $12.5 billion margin loan tied to his Tesla stock. University of Maryland professor David Kirsch, whose research focuses on innovation and entrepreneurship, said investors started to worry about a cascade of margin calls on Musk’s loans.