Twitter's stock price rose after Elon Musk, the world's richest man, issued an offer to Twitter on Thursday, while Shares of Tesla, Musk's electric car company, were sold in panic.
Tesla shares tumbled 3.7 percent on Thursday. Since Musk disclosed on Monday that he owns more than 9 percent of Twitter, the world's most valuable automaker has fallen more than 9 percent.
Analysts pointed out that investors mainly have "two big" concerns, one is that Musk's Twitter acquisition plan may "distract" him from Tesla operations, and the other is that Musk may sell Tesla shares to finance the transaction.
Musk announced Thursday that it has made an offer to Twitter to acquire all of Twitter's shares at $54.20 per share. According to Musk's bid, Twitter's valuation reached $43 billion.
Musk's operation or "distraction" of Tesla
"Elon would be distracted. He has a lot to do. He's been involved in a lot of different businesses," said Gene Munster, managing partner at Loup Ventures, a venture capital firm that owns Tesla. "This is a 1-3 month headwind for Tesla stock prices."
Analysts note that while Musk spoke about the changes he would like to see Tweet make, Tesla also faces its own challenges — the need to ramp up production at new assembly plants in Berlin and Texas. At the same time, Tesla's largest Shanghai factory was shut down due to the epidemic.
"Musk is Tesla, and investors don't want to see Tesla lose that leadership advantage," said Craig Irwin, an analyst at investment bank Roth Capital Partners.
Investors' concerns are justified. In addition to Tesla, Musk leads space exploration company SpaceX, brain chip startup Neuralink and tunnel construction company Boring Company.
Last year, Musk said he worked 7 days a week, like a "workaholics." Almost all of his time is allocated to Tesla and SpaceX. For Musk, who is already busy, running Twitter will inevitably take away some of his energy.
Musk may sell Tesla shares to complete the acquisition
Another concern, analysts said, is how Musk will finance a potential deal for Twitter, which would include the sale of Tesla stock as well as a large number of loans.
Wells Fargo analyst Colin Langan said Musk, who already holds a 9 percent stake in Twitter, needs $39 billion to complete the deal, and selling more Tesla stock could put further pressure on the stock price.
According to company policy, Tesla executives can lend money by pledging company stock, but the loan limit does not exceed 25% of the total value of the pledged shares.
That means Musk could borrow $42.5 billion by pledging all of his $170 billion worth of Tesla shares. But a document filed by Tesla last year showed that Musk had pledged more than half of his Tesla shares for personal debt reasons.
Musk said Thursday that he owns the assets to buy Twitter, but did not provide details. His wealth comes mainly from Tesla and Space X stocks. Late last year, Musk sold more than $16 billion in Tesla stock, of which $11 billion was used to pay taxes.