Tesla Inc. on Tuesday With a $126 billion loss in market capitalization, investors fear CEO Elon Musk may have to sell shares to buy Twitter Inc for $44 billion. A $21 billion stake is funded.
Tesla did not participate in the Twitter deal, but tesla's stock has become a target for speculators because Elon Musk has refused to publicly disclose the source of the acquisition funding. Tesla shares fell 12.2 percent on Tuesday, meaning the value of his Tesla stake fell by $21 billion, the same value as the $21 billion in cash he promised to buy Twitter.
Daniel lves, an analyst at Wedbush Securities, said concerns about Elon Musk's upcoming stock sale and the possibility he could be distracted by Twitter weighed on Tesla's stock price. "This gave rise to a festival named after a bear," he said.
Tesla did not immediately respond to Reuters' request for comment.
To be sure, Tesla's stock price plunge is set against the backdrop of challenges for many tech-related stocks. The Nasdaq closed its lowest level since December 2020 on Tuesday, with investors worried about slowing global economic growth and a more aggressive rate hike by the U.S. Federal Reserve.
Twitter's shares also fell 3.9 percent on Tuesday to close at $49.68, though Elon Musk agreed monday to buy for $54.20 a share in cash. Still, the widening spread still reflects investors' fears that a sharp drop in Tesla's stock price could cause the world's richest man to reconsider his deal with Twitter. Much of Elon Musk's $239 billion fortune comes from Tesla.
Ed Moya, senior market analyst at OANDA, said: "If Tesla's stock price continues to fall, it will jeopardize his financing."
As part of the Tesla deal, Elon Musk also secured a $12.5 billion margin loan pegged to Tesla stock. He has borrowed about half of his tesla stake as collateral.
David Kirsch, a professor at the University of Maryland, focuses on innovation and entrepreneurship. He said investors began to worry about "a flurry of margin calls" on Musk's loans.