Tesla shares tumbled more than 11% on Tuesday, wiping about $110 billion off the electric car maker’s valuation, a day after Tesla’s chief executive and largest shareholder company, Elon Musk, has closed a deal to buy the social network Twitter.
Musk is financing the $44 billion acquisition with $13 billion in loans from Wall Street’s biggest lenders, plus a $12.5 billion credit secured by his Tesla stake. The billionaire has yet to say how he will fund the remaining $21 billion in cash he has pledged, raising the possibility that he will need to sell billions of dollars of stock in the automaker.
That prospect added to the pressure on Tesla’s stock. The group is among the world’s most valuable publicly traded companies, valued at $920 billion as of Tuesday, and its shares are trading with speed almost unparalleled in US markets.
A significant drop in Tesla’s value would also pose problems for Musk, whose financial margin loan (released by banks or brokerages to guarantee margin coverage on a given investment) is guaranteed by his stake in the electric car maker.
With more than two hours of trading remaining on the day, more than 30 million Tesla shares changed hands, worth about $28 billion. That was more than three times the level of the second most traded stock by value, Apple, maker of the iPhone.
The decline in Tesla weighed on the market overall, accounting for more S&P 500 losses on Tuesday than any other company in the benchmark stock index.
Musk and his Morgan Stanley bankers have been sounding out other investors who might want to invest in a privately held Twitter account alongside him, which would reduce the size of the check he has to write himself, people familiar with the matter said.
Twitter shares were trading around $50 on Tuesday, about 8% below the $54.20 price at which Musk agreed to take the company private. The difference between the current price of the social media platform and the price of the “take-private” raises concern among investors that the deal may not materialize.
The deal, if completed, would mark one of the largest leveraged buyouts on record. However, it could still fall apart if Musk doesn’t increase the equity share or if the transaction is blocked by regulators.
The European Union warned on Tuesday that Musk must abide by the bloc’s rules on moderating harmful content. The billionaire, who had previously criticized Twitter, linked its acquisition to freedom of expression, which he describes as “the foundation of a functioning democracy”.
His comments generated concern and joy on opposite sides of the US political spectrum.
Tesla shares are down 22% since Musk became Twitter’s biggest shareholder more than three weeks ago.
Translated by Luiz Roberto M. Gonçalves
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