This week it was announced that Twitter has “entered into a definitive agreement to be acquired by an entity wholly owned by Elon Musk”, for a deal that will end up being worth around $44 billion. The proposed acquisition would see Twitter become a private company – meaning no pesky shareholders trying to disagree with Elon Musk – and is expected to close this year.
Musk’s estimated $240 billion fortune is primarily in Tesla shares, and part of his funding for the Twitter deal is $21 billion of his own money, plus a $12.5 billion loan guaranteed. against a chunk of $62.5 billion.thank you, baby). However, the value of Musk’s shares is already partially leveraged for other commitments. The guy is loaded, but he’s also on the hook for amounts of money that depend on everything continuing to go well.
Which hasn’t been a problem for Tesla in recent years: It’s now the most valuable car company on the planet, and last week it reported a profit of $3.3 billion in the first three months of the year. You would think investors would be happy, but for the past month, their stock price has been on an unbroken downtrend. A Tesla share is currently worth $905: a month ago, it would have been worth $1,093, about 17% more.
Yesterday, Tesla shares dropped from $998 to $876 a share, a drop that saw the company lose about $125 billion in its market value. It has climbed a little today to $905, but the overall decline is happening alongside the acquisition of Musk on Twitter and questions about where exactly his $21 billion is coming from.
So one explanation is that investors fear a big drop in value if Musk suddenly lashes out at a load of Tesla stock and wants to get out when things are good. Another is that Tesla’s value has skyrocketed in recent years, and while it is undoubtedly a valuable, top-tier business, some may be wondering if it was overvalued during a period of rapid and massive growth: especially when it looks like the Tesla. CEO will take on a huge role in an unrelated global business.
One last piece of context is that while Tesla is undoubtedly in a major downtrend right now, this is also happening. amid a broader general decline in the value of technology-driven stocks.
In addition to Tesla, Musk runs Space X, founded the Boring Company and has Neuralink: the one that will microchip our brains. He is a somewhat controversial figure, but a talisman in the sense that people associate him closely with the success or otherwise of these ventures. It’s also true that he’s caused investors considerable trouble in the past with ill-judged public pronouncements, and frankly, he seems a lot more obsessed with Twitter than the guy taking us into space should be.
Musk has yet to work out how exactly the Twitter takeover will be financed and how he intends to juggle running one of the world’s biggest social media platforms with all his other commitments. Some reports suggest that this drop in Tesla’s value could be a big problem for the acquisition, because it will largely depend on the value of those shares. Musk has not commented on the drop in Tesla’s share price — which is likely one of the few crumbs of comfort for Tesla shareholders right now.