Opinions about Elon Musk’s deal to purchase social media platform Twitter have flown wild since the announcement, but few have been as clear as those expressed by Tesla investors. Tesla stock has absolutely cratered in the immediate aftermath of Musk’s purchase. Investor confidence is low as analysts question just how Musk will come up with the $44 billion purchase price for Twitter — and how it might affect Tesla.
Musk’s big purchase made headlines.
Musk had been making noises about investing in, or buying outright, the social media platform. But the story really picked up legs this week as Twitter announced that Musk had indeed come to an agreement to purchase the company for a whopping $44 billion.
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Musk can theoretically afford the price tag.
With a net worth somewhere in the quarter-trillion-dollar range, Musk is the world’s richest person. But much of his fortune is tied up in companies like Tesla and SpaceX, and finding $44 billion to buy Twitter may be complicated.
Tesla stock has plummeted.
The electric carmaker is still a going concern. Its current market capitalization sits at an incredible $909 billion . Still, that’s a significant drop of around 12%, given that the company’s capitalization sat north of a trillion dollars just two days ago.
How will Musk pay for Twitter?
As Insider reported, he’s secured a $13 billion loan from Wall Street investors and another $12.5 billion against his Tesla shares, bringing him up to $25.5 billion of Twitter’s $44 billion price tag. He hasn’t announced a plan to cover the remaining amount.
Will he offload Tesla stock to pay the bill?
This question sits at the heart of investors’ concerns. It seems likely that Musk will sell some of his shares in the white-hot car company to free up enough money to complete the Twitter purchase.
Tesla gave a warning about this earlier in the year.
“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 noted in its annual report.
The company is still doing fine.
While the Twitter takeover has led to a speed bump for Tesla, the company is still a massive success. It reported a whopping 81% year-on-year increase in revenue for the first quarter of 2022 and delivered a record-breaking number of vehicles to consumers.
Will he or won’t he?
Musk has sold Tesla stock before, offloading $5 billion last November to cover his tax bill. But he’d need to sell much more in order to pay for Twitter.
In any event, this volatility is likely temporary, a speed wobble for a company that’s been valued at more than a trillion dollars.
What do you think?
It’s kind of weird to think of someone with hundreds of billions of dollars scrambling to pay a bill, but that’s what happens when someone wants to buy something worth tens of billions of dollars.
Let us know what you think of this story — and of Elon Musk buying Twitter — in the comments section.
h/t: Insider
