Tesla shares begin to recover following $126bn loss from Musk Twitter deal

Credit: Tesla

Tesla shares (NASDAQ: TSLA) slightly rebounded on Wednesday following a $126 billion loss after investors showed skepticism after CEO Elon Musk acquired social media platform Twitter earlier this week.

Tesla shares fell over 12 percent during Tuesday’s trading session after it was revealed that Musk may have to sell some Tesla shares to fund his portion of the $44 billion acquisition deal, which was announced on Monday.

Investors seemed to show skepticism that Musk, who is the world’s richest person, could balance his plans to drastically modify Twitter’s platform with the already-demanding job requirements of Tesla, his automotive company. Additionally, funding the acquisition of Twitter may require Musk to leverage against some of his Twitter holdings, as he is the largest shareholder of the company. Musk will be forced to sell shares of Tesla stock to fund the $21 billion in equity financing the CEO will use to finalize the deal.

“The $21 billion in equity financing for Twitter will result in some piece of Musk’s Tesla ownership being sold over the coming year even though a core piece of this financing is likely held as collateral and not actually sold in the transaction,” Wedbush analyst Dan Ives said. “This is why $TSLA [is] down as overhang.”

Ives also said in a note to investors on Wednesday, “Combining this dynamic with the debt taken on as part of the Twitter transition, now a good portion of Musk’s Tesla shares will be spoken for/used as collateral for this deal which is putting near-term pressure on the stock.” Ives went on to say that, while Tesla’s overall growth story is not going to be affected by Musk’s Twitter transaction, Musk is the “heart and lungs” of the company, which complicates Tesla’s near-term outlook.

Wednesday’s trading session was much more positive in terms of Tesla’s performance. The stock started to recover, reaching prices as high as $918 per share. At the time of writing, shares were up 0.71 percent, trading at $882.60.

Tesla reported a positive earnings call last week, with its highest operating margin in company history at 19.2 percent. It also reported over $18 billion in total revenues, an 81 percent growth from the same quarter last year.

Disclosure: Joey Klender is a TSLA Shareholder.

I’d love to hear from you! If you have any comments, concerns, or questions, please email me at joey@teslarati.com. You can also reach me on Twitter @KlenderJoey, or if you have news tips, you can email us at tips@teslarati.com.

Joey Klender: Joey has been a journalist covering electric mobility at TESLARATI since August 2019. In his time at TESLARATI, Joey has broken several big stories, including the first images of the Tesla Model S Plaid, the imminent release of the 4680 Model Y through EPA certification, and several expansions to the Lucid AMP-1 factory in Arizona, to name a few. His stories have been featured in several publications, including Yahoo! Finance, Fox News, CNET, and Seeking Alpha. In his spare time, Joey is playing golf, watching MMA, or cheering on any of his favorite sports teams, including the Baltimore Ravens and Orioles, Miami Heat, Washington Capitals, and Penn State Nittany Lions. You can get in touch with joey at joey@teslarati.com. He is also on Twitter @KlenderJoey.
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