Tesla Inc (NASDAQ:TSLA) had US$126bn wiped off its market value yesterday over concerns that chief executive Elon Musk will sell shares in the electronic car maker to fund his acquisition of Twitter Inc (NYSE:TWTR).
Musk is believed to be part-funding the Twitter deal with US$21bn of his own equity as well as a further US$12.5bn loan secured against his Tesla stake.
Prior to yesterday’s market movements, where shares fell 12.2% to US$876, and assuming Musk has not sold any of his shares yet, his stake in Tesla would be valued at US$177bn.
A 12.2% reduction in shares experienced yesterday would equate to a roughly US$21bn reduction in the value of Musk’s stock, equal to the amount of his own equity that he has committed to the Twitter deal.
Part of the deal will also be funded by a US$12.5bn margin loan tied to his Tesla stock, borrowing money from his broker, and using his Tesla stock as collateral.
Neil Wilson, an analyst at Markets.com, said there is a worry among Tesla investors that Musk “would be forced to sell down a tonne of his stock to finance the US$21bn cash element of his Twitter purchase”.
Wilson also questioned exactly how the deal will be funded, saying a “US$21bn cheque is a lot even for him [Musk] to write.”
Musk also may be using the Twitter deal as an excuse to get rid of lofty Tesla stock, even though not at all-time high levels, without attracting criticism, Wilson suggested.
All this being said, Tesla shareholders will not be happy, “even with a cult stock, acolytes can get annoyed at stuff their dear leader might do”, he pointed out.
"Like say the co-owner (Musk) of the business (Telsa) mortgaging a chunk of his holding to buy up a business (Twitter) that has nothing to do with making and selling cars or space rockets. Tesla shareholders get nothing from this except a CEO with yet another distraction.”