Tesla (TSLA) Loses Billions in Value on Elon Musk Twitter Deal Fears

Twitter’s sale to Elon Musk might be good for Twitter’s shareholders and Mr. Musk’s ego, but it has Tesla investors spooked. When the news was announced on Monday—with the social media platform’s board agreeing to Musk’s bid of $54.20 per share, or roughly $44 billion—the electric vehicle company of which Musk is CEO saw its stock dipped slightly. Apparently it took a couple of days for investors to chew on what the Twitter deal might mean for Musk’s stewardship of the Tesla brand, which had record-setting quarterly results come in only a few days ago. Simmering questions and jitters eventually led to a sell-off on Wednesday, and the stock (at the time of this writing) has plunged to right around $900, down from prices as high as $1,145 just a few days ago.  

That wiped a little over $120 billion from the company’s valuation, although TSLA is still significantly up year-over-year. A few factors conspired to create a perfect storm for a quick correction in the company’s fortunes. For one, the war in Ukraine and today’s news about Russia shutting off its natural gas pipelines to Bulgaria and Poland raised fears of an economic slowdown. Then there’s the concern about U.S. interest rate hikes and inflation’s corrosive effects on profits.

But there’s one factor that is closer to home for Tesla: Elon Musk’s attention. Several analysts quoted by Automotive News, Forbes, and others feared that running Twitter would distract Musk from the focus they feel it needs to continue to dominate the EV space. There’s also some fear that some of the Tesla stock that Musk holds personally, which is already known to be collateral in the Twitter deal, might be sold to gin up cash to fund the acquisition.  

All that adds up to a bad week for Tesla. Investors have the unenviable and perennially difficult task of trying to divine the future, and with a mercurial CEO like Musk and a highly volatile global economic picture, that job gets even more difficult. But given recent financial results, the fundamentals of Tesla’s business seem solid even if it’s facing some headwinds.

Leave a Reply