While Elon Musk is no doubt pleased that he will soon be the new owner of Twitter, he may not be overly thrilled at how Tesla shareholders have reacted to the news.
The valuation of the electric automaker plummeted by $126 billion on Tuesday, with the share price falling 12.2 per cent to $876.42. Tesla’s valuation had dropped by roughly $250 billion since April 4 when Musk first confirmed that he had purchased a 9.2 per cent stake in Twitter.
Importantly, this is not the first time that more than $100 billion has been wiped from Tesla’s valuation in a single day. Back in late January, the company’s value dropped by $109 billion shortly after it announced fourth-quarter financial earnings. Prior to this date, Tesla also shed more than $100 billion in its value over a single day on November 9, 2021, Bloomberg reports.
Tesla isn’t alone in seeing its value drop as it reflects a selloff across the market on the back of high inflation and slow economic expansion.
It is understood that some Tesla investors are concerned that Musk may need to sell some of his Tesla shares to fund his hostile takeover of Twitter. The world’s richest person has personally guaranteed $21 billion for the purchase and is using Tesla shares as collateral.
“Tesla has three strikes against it today,” chief market strategist at National Securities Corp, Arthur Hogan, said. “Apart from the worries about a share sale and a wider selloff 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.”
“Musk is taking a good deal of risk by using Tesla shares as collateral,” Russ Mould from AJ Bell added in a statement to Bloomberg. “If the electric carmaker’s shares were to unexpectedly crater, that could create a lot of discomfort.”
