Elon Musk’s offer to buy Twitter has raised concerns among Tesla investors and analysts that the electric car maker could suffer as the chief executive is distracted by his takeover game and the possible sale of Tesla shares to finance the deal.
The billionaire entrepreneur, who also heads the rocket company SpaceX, on Thursday targeted Twitter with a ও 43 billion (approximately Rs 3,29,278 crore) takeover offer.
Musk’s idea is working to close the deal, perhaps selling more of his Tesla shares, and then worry Tesla observers overseeing another company.
“Elon is confused. He’s got a lot going on. He’s involved in a variety of endeavors,” said Jean Munster, managing partner at Loop Ventures, a venture capital firm that owns Tesla shares. “It’s a one- to three-month headwind of Tesla stock.”
Shares of Tesla, the world’s most valuable automaker, have fallen more than 9 percent since its release on Twitter on Monday. On Thursday, Tesla stock fell 3.7 percent.
Although Musk spoke of the potential change he wants to see on Twitter, Tesla faces its own challenges – the need to increase production at new assembly plants in Berlin and Texas, analysts say. Meanwhile, Tesla’s Shanghai plant – its largest – has been deactivated by the COVID-19 crackdown in China.
“The mask is Tesla, and investors don’t want Tesla to lose that lead,” said Craig Irwin, an analyst at Roth Capital Partners.
And investors have their own masks before this campaign on the basis of which they create their fears. Last year, he said he worked seven days a week – “crazy hours” – sharing time between Tesla and SpaceX. He led brain-chip startup Neurallink and the tunneling enterprise Boring Company.
Another concern is how Musk will finance a possible deal for Twitter, which would include stock sales and huge debt, analysts say.
Wells Fargo analyst Colin Langan said Musk, which owns more than a 9 per cent stake in Twitter, needed $ 39 billion (approximately Rs 2,98,740 crore) to complete the deal, and that selling more shares could put more pressure on Tesla’s stock.
Tesla executives may mortgage their company’s stock as collateral for a loan, but according to company policy, the maximum debt mortgage will not exceed 25 percent of the total value of the stock.
This means that he can borrow $ 42.5 billion (approximately Rs. 3,25,548 crore) by mortgaging all the shares worth $ 170 billion (approximately Rs. 13,02,190 crore). But he has already pledged more than half of his Tesla shares to secure certain personal loans, according to a Tesla filing last year.
On Thursday, Musk said he had the resources to buy Twitter, but did not elaborate.
The fortunes of the world’s richest people are largely based on stocks of Tesla and SpaceX. Towards the end of last year, he sold $ 16 billion (approximately Rs 1,22,560 crore) of Tesla shares, of which he said $ 11 billion (approximately Rs 84,259 crore) would be taxed.
Howard Fischer, a partner at law firm Moses & Singer and a former senior trial counsel for the U.S. Securities and Exchange Commission, said he was “potentially putting himself under a huge obligation down the road.”
Thomson Reuters 2022