Why Stocks of Tesla & Twitter Fell After Elon Musk's $44 Billion Deal
Musk has to come up with $21 billion himself and there is speculation that he will sell some of his Tesla shares.
On Tuesday, 26 April, a day after Twitter agreed to sell itself to Elon Musk, Tesla's shares plummeted over 12 percent, reducing the company's market value by roughly $126 billion. This despite the fact that Tesla isn't involved in the deal at all.
Twitter's shares also fell nearly 4 percent the same day.
This is partly because Elon hasn't yet disclosed where he will get some of the cash he needs to pay for Twitter. The transaction is valued at $44 billion. He plans to take $13 billion from banks in loans and borrow $12.5 against his own equity.
However, Musk has to come up with $21 billion himself and there is speculation that he will sell some of his Tesla shares to do so.
'A Bear Festival'
Since investors are worried that Musk will sell Tesla stock to finance his Twitter deal, they are rushing to sell the former.
This and the possibility that Musk will be distracted from Tesla and shift focus to Twitter is "causing a bear festival on the name," Wedbush Securities analyst Daniel Ives told Reuters.
The fall in Tesla shares, in turn, led to a decline in Twitter's market value.
Likely because investors are concerned that the massive fall in Tesla's stock will hurt Musk's ability to fund the Twitter deal, potentially causing him to back out.
"If Tesla's share price continues to remain in freefall that will jeopardise his financing."OANDA senior market analyst Ed Moya to Reuters
Musk is the richest man in the world with a net worth of roughly 251 billion, according to Bloomberg. However, most of his wealth is tied up in Tesla stock, which is very volatile.
Tech stocks in general were struggling on Tuesday as Nasdaq closed at its lowest level since December 2020 due to slow global growth and interest rate hikes from the US Federal Reserve.
(With inputs from Reuters and Bloomberg)
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