- Tesla’s market capitalization plummeted after Elon Musk’s announcement on Twitter.
- To reduce the risk, Musk secured new funding.
- Some analysts think the deal could be a big deal for the Tesla co-founder.
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The world’s largest electric vehicle manufacturer, Tesla (NASDAQ :), has lost more than $ 228 billion in market capitalization since its billionaire founder, Elon Musk, first revealed plans to buy the platform. social media Twitter (NYSE 🙂 on April 4th.
Those numbers represent nearly a 20% loss from the company’s $ 1.187 billion market capitalization prior to Mr. Musk. TSLA closed Thursday at $ 873.28.
Although the overall market environment contributed to the pullback, Musk’s Twitter deal played an important role. Investors are wondering if the billionaire will tap into his stake in Tesla to help fund the proposed $ 44 billion acquisition.
Musk raised $ 13 billion in bank financing, $ 12.5 billion in margin loans secured by Tesla stock, and promised to pay another $ 21 billion to himself to acquire the social media company.
However, in the latest development reported yesterday, Musk told reporters he has raised approximately $ 7.1 billion in new financial commitments, including billionaire Larry Ellison, a prince of Saudi and Sequoia Capital.
Those numbers would allow him to split the size of the marginal loan by $ 6.25 billion, making the deal more risky for Musk and his lenders. The new arrangement also slightly reduces the money Musk has to bring personally.
The billionaire recently completed a Tesla stock sale for more than $ 8 billion that would help him cover taxes on his trusted options. In June 2021, Tesla reported that nearly half of Musk’s stake in the company served as collateral for personal loans.
The next big question
Assuming Musk manages to seal the deal on Twitter by the end of the year, the next big question still on the minds of many investors is whether the world’s richest man is in danger of spreading.
These concerns are particularly relevant if Musk will have a full-time role in the newly acquired company. CNBC reported yesterday that he plans to serve as Twitter’s interim CEO for a few months after the deal closes.
According to a recent analysis in the Wall Street Journal, more than half of Tesla’s valuation is based on future projects that rely heavily on Musk. These include driverless robotaxis, which he hopes to begin manufacturing in 2024, and his Optimus robot project, which he says will eventually become more important than the automotive business and driverless car operation.
“The company seems to have enough investors taking him at his word. The question is what will they think if he starts talking less about Tesla and more about Twitter.
His leadership at space exploration company SpaceX is a testament to his extraordinary multi-tasking ability. But what vision can a man have, and in some different direction can he point it?
Tesla supporters, however, continue to support Musk and his vision to unlock the value of Twitter. Dan Ives, a Wedbush analyst who has a $ 1,400 target price at Tesla, said in a note that today’s funding announcement eliminates a significant overhang. He added:
“This is a smart financial and strategic move by Musk that the entire company will accept and shows that the Twitter deal is now on a glide path to close by the end of the day. End of the year, which should close the arb gap in the name. “
Conclusion: Should we run away from Tesla stock?
Musk’s involvement on Twitter is another distraction that Tesla investors have to deal with, especially as competition in the EV market heats up.
Musk is no doubt taking a good risk using Tesla shares as collateral, even after securing new commitments. If the electric car maker’s share drops significantly, it can add uncertainty to the company’s holdings.
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