Tesla wiped roughly $126 billion off its valuation Tuesday as the stock fell 12 per cent on investors’ concern that Elon Musk may sell shares to complete his $44 billion takeover of Twitter.
The electric vehicle maker’s market capitalisation is now down more than $275bn since April 4, when Mr Musk disclosed that he increased his Twitter stake. That’s a drop of roughly 23 per cent. The dollar value of Mr Musk’s 17 per cent stake in Tesla has shrunk by more than $40bn, almost double the equity portion he pledged in the Twitter transaction.
Tesla’s stock price is sinking amid a broader sell-off in equity markets around the world due to slower economic expansion and persistent inflation. In addition, investors have fled high-growth companies as the Federal Reserve prepares to embark on a series of significant rate hikes.
But Mr Musk isn’t doing Tesla any favours by providing scant details on how he will cover the $21bn equity piece that he personally guaranteed. What’s known is that Mr Musk is using Tesla shares as collateral in the transaction. That has led to investor worry that the Tesla chief executive may sell some of his stake to fund the Twitter acquisition. Those concerns are “causing a bear festival in the name,” Wedbush analyst Daniel Ives said.
“Tesla has three strikes against it today,” said Arthur Hogan, chief market strategist at National Securities Corp. “Apart from the worries about a share sale and a wider sell-off in growth stocks, Tesla shares are also reflecting some concern that Elon Musk could be spreading himself and/or his bench too thin taking on this new challenge.”
To be sure, Tesla did report blockbuster quarterly results last week. And prior to Tuesday, its shares were the best performers among the high-profile growth stocks in the NY FANG+ Index this year.
Still, the risks to Tesla’s stock price remain as the uncertainty surrounding the shares continues.
“Mr Musk is taking a good deal of risk by using Tesla shares as collateral,” AJ Bell’s Russ Mould said. “If the electric carmaker’s shares were to unexpectedly crater, that could create a lot of discomfort.”
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Tesla chief executive Elon Musk speaks during the opening day of the Tesla Gigafactory in Gruenheide, Germany. EPA -
Musk speaks next to German Chancellor Olaf Scholz and the prime minister of Brandenburg state, Dietmar Woidke, during the opening ceremony. AFP -
The Tesla chief, right, was cheered as he oversaw the handover of the car maker's first German-made cars at the Gruenheide plant. EPA -
Musk described the opening as "another step in the direction of a sustainable future". EPA -
Tesla is likely to launch a test version of its new "full self-driving" software in Europe, possibly next year, the chief executive said. EPA -
Musk dances as he hands over the first Teslas from the new factory. Getty Images -
Musk said battery production will be a "challenge" next year and a "limiting factor" in the coming years. Reuters -
Tesla cars are parked at the site of the new Tesla Gigafactory in Gruenheide, Germany. Reuters -
Tesla was handing over the first Model Y cars made at its €5 billion Gruenheide plant to clients on March 22, the company said. Getty Images -
The new Tesla Gigafactory is the company's first European production centre. Getty Images -
Newly completed Tesla Model Y electric cars parked at the site near Gruenheide. Getty Images -
The new factory is the largest investment in a German car factory in recent history. Getty Images -
A road sign reading 'water protection area' next to the Tesla logo at the site of the Tesla factory. EPA -
A road sign reading 'Tesla Street' at the new plant. EPA -
A building under construction at the Tesla factory. EPA -
At full capacity, the factory will produce 500,000 cars annually. EPA -
Tesla plans to hire 12,000 workers at the plant. Bloomberg
