Tesla Inc lost $ 126 billion in value on Tuesday due to investors’ concerns that CEO Elon Musk may have to sell shares to fund his $ 21[ads1] billion equity contribution to his $ 44 billion acquisition of Twitter Inc.
Tesla is not involved in the Twitter agreement, but the shares have been targeted by speculators after Musk refused to disclose where his money for the acquisition comes from. The 12.2% drop in Tesla’s shares on Tuesday was equivalent to a $ 21 billion drop in the value of his Tesla stake, the same as the $ 21 billion in cash he committed to the Twitter deal.
Wedbush Securities analyst Daniel Ives said that concerns about the upcoming stock sale from Musk and the possibility that he will be distracted by Twitter weigh the Tesla shares. “This (s) is causing a bear festival by name,” he said.
Tesla did not immediately respond to a request for comment.
To be sure, Tesla’s stock plunge came against a challenging backdrop for many technology-related stocks. The Nasdaq closed at its lowest level since December 2020 on Tuesday, when investors worried about slowing global growth and more aggressive rate hikes from the US Federal Reserve.
Twitter shares also plummeted on Tuesday, falling 3.9% to close at $ 49.68, although Musk agreed to buy it on Monday for $ 54.20 per share in cash. The growing spread reflects investors’ concerns that the sharp decline in Tesla’s shares, from which Musk derives most of its $ 239 billion fortune, could make the world’s richest person think twice about the Twitter deal.
“If Tesla’s share price continues to fall in free fall, it will jeopardize his financing,” said OANDA senior market analyst Ed Moya.
As part of the Tesla agreement, Musk also took out a margin loan of $ 12.5 billion related to his Tesla share. He had already borrowed about half of the Tesla shares.
Professor David Kirsch at the University of Maryland, whose research focuses on innovation and entrepreneurship, said investors were beginning to worry about a “cascade of margin requirements” on Musk’s loans.
(This story has not been edited by NDTV staff and is automatically generated from a syndicated feed.)