Tesla’s value dropped Tuesday by more than double the cost of Twitter
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SAN FRANCISCO — Elon Musk’s purchase of Twitter led to a more than $100 billion hit to Tesla’s stock Tuesday, significantly driving down the CEO’s fortune that he is plowing into his takeover of the social media giant.
Tesla’s stock dropped more than 12 percent, bringing its market capitalization down to $906 billion — compared with more than $1 trillion previously — a steep decline the day after Musk and Twitter reached an agreement for the Tesla CEO to take ownership at the company. Musk has pledged billions of dollars worth of his Tesla shares as collateral for his $44 billion takeover of Twitter. If Tesla’s value sinks, Musk could be required to shed some of his shares to meet his loan obligations, leading to a downward spiral in his net worth.
Investors have worried about how much Musk is willing to risk because he could be sacrificing a stock that has dazzled investors in pursuit of a relative underperformer in Twitter.
Analysts said Tesla, and thus Musk’s net worth, will be affected by two factors: the amount Musk has committed to the Twitter purchase, and the fears that he’ll become distracted from his role as Tesla’s chief executive. The carmaker’s stock had recently surged on a strong earnings report after Tesla reported a $3.3 billion profit and more than 300,000 quarterly deliveries despite supply chain challenges.
“Now the fears around Musk selling a slug of Tesla stock to pay for Twitter becomes an overhang for Tesla,” said Daniel Ives, an analyst at Wedbush Securities. “The easy part for Musk was winning Twitter. The hard part is going to be fixing it and dealing with the ripple effects on the golden child Tesla.”
Musk’s net worth reached $270 billion last week, according to Forbes. It was down to about $240 billion by Tuesday.
Tesla’s stock saw modest dips over the period when Musk’s pursuit of Twitter became public, but did not react especially strongly in part because of doubts about whether he’d end up as owner. That changed Tuesday, the first full day of trading after the purchase announcement.
Some of the fears around Musk’s acquisition of Twitter stem from just how much Tesla stock he has put on the line for his loans. At points last year, Musk had put more than half of his Tesla shares down as collateral, according to financial filings. The Twitter purchase was expected to add to the share he was willing to risk.
And Tesla has warned about the consequences of all that collateral to its stock. Tesla stock dropped precipitously last year when Musk sold around 10 percent of his shares, including $5 billion in the span of days, to cover a tax bill.
Another sell-off might send Tesla’s stock — and Musk’s finances — down further.
“If Elon Musk were forced to sell shares of our common stock that he has pledged to secure certain personal loan obligations, such sales could cause our stock price to decline,” Tesla said in its annual filing.
“We are not a party to these loans,” Tesla said. And if the stock price declined, it added, banks could demand that Musk sell shares to meet his loan requirements.
That probably would send Tesla’s stock price spiraling.
