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• Tesla stock is likely to be affected by Musk’s acquisition of Twitter
• Sale of Tesla shares required for financing
• Experts care about Musk’s time management
Tesla boss Elon Musk can buy Twitter short messaging service. The board approved its offer of $ 54.20 per share on Monday, valuing the microblogging service at around $ 43 billion. As announced last week, the multi-billionaire raised $ 46.5 billion for the acquisition – these are loan commitments of around $ 25 billion, with an additional $ 21 billion that will be brought in through will-to-share. 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 Twitter share price is still below the offer price. According to experts, skepticism is also on the agenda for the shareholders of Elon Musk’s electric car house Tesla. They fear that both the share price and Tesla’s business may be affected by the Twitter acquisition.
Buying Musk on Twitter could weigh on Tesla’s share price
According to Forbes, Elon Musk is the richest person in the world with a fortune of nearly $ 270 billion (as of April 26, 2022), but this mostly consists of shares in electric car maker Tesla and space company SpaceX. Musk has had to sell Tesla stock 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 probably have to sell some of his Tesla stock to fund the deal,” analysts at Pensions & Investment Research Consultants (Pirc) said. it’s money “. In fact, Musk’s plan is apparently to raise $ 21 billion through the sale of shares, a move that other analysts like Wells Fargo’s Colin Langan were also expecting. According to Bloomberg, Langan warned in a research note that this could put significant pressure on Tesla’s share price. However, the stock has had a weak run in recent times: since the beginning of the year, the Tesla stock certificate has lost about 5.5% in value (starting from the closing price of 25 April 2022). It is only thanks to the surge in prices after the latest quarterly data that less is not even greater at the moment.
According to “Reuters”, Tesla shares should also come into play as a hedge for loan commitments. As the news agency writes, Tesla executives can deposit their shares as collateral for the loans, but the maximum loan amount cannot 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 Tesla’s boss claimed he has over $ 25 billion in loan commitments, he may have pledged more than half of his Tesla stock as collateral. “It is potentially positioning itself for huge responsibilities going forward,” former SEC adviser Howard Fischer warned Reuters.
Twitter may be too distracting for Elon Musk from working at Tesla
But even aside from these more direct effects on Tesla’s share price, the Twitter acquisition is expected to have direct consequences for the Tesla company as well, which should subsequently affect the share price as well. Because numerous experts fear that Elon Musk may be too distracted from his other duties 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 the company, wrote in an email. New Constructs search, available at “CNN” and “Bloomberg”. Indeed, there is currently a lot to do at the e-car manufacturer: production needs to be stepped up in the new gigafactories in Texas and Grünheide – and first customers have already complained of numerous defects, especially in the latter’s cars. Additionally, Tesla is facing increasing competition in the electric mobility industry, both from newcomers and established car manufacturers. “Tesla faces stiff competition in the electric vehicle segment. The big automakers are catching up and producing innovative electric vehicles,” continued Trainer. “As CEO of a trillion-dollar company, Elon Musk should focus on Tesla and not waste time acquiring and managing a $ 43 billion company,” Trainer concluded.
“Elon is distracted. He has a lot to do. He is involved in a lot of different things,” analyst Gene Munster told Reuters, warning of a “one to three month headwind for Tesla stock.” Musk is not only involved in all product decisions at Tesla – according to “Bloomberg” once described himself as a “nano manager” who does not transfer decisions – but also in his other companies SpaceX, Neuralink and The Boring Company. From time to time he is also involved in the cryptocurrency industry and also works at Tesla on the development of a humanoid robot called Optimus. On top of all these projects, Twitter is another company Musk has to lead, and apparently he also wants to lead. Because he has already expressed that he does not trust the current management of Twitter. So once the purchase is complete, he will probably want to take the reins in his hands. But Twitter is a mature company, and the short message service is on a very different level than many of Musk’s other companies. Twitter leadership would likely take Elon Musk a long time, at Tesla’s expense.
“Musk is Tesla and investors don’t want to see Tesla lose that leadership,” warned Craig Irwin of Roth Capital Partners, according to Reuters. Why Tesla’s management team is skinny: The company lacks a COO and otherwise only Andrew Baglino and Zachary Kirkhorn are listed on the website as board members alongside Elon Musk. According to “This is Money,” 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 to the electric car maker’s shareholders. The fact that Tesla shareholders are not particularly enthusiastic that Elon Musk will soon be leading Twitter was also demonstrated by the reaction of Tesla shares after it was learned that the Twitter board had given up its resistance: it is fell on the corresponding day by 0.7 per cent.
Financeen.net editorial staff
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