Tesla stock down over 9% in early trade after Musk seals Twitter deal
The drop in Tesla's shares suggests that the company's investors are concerned about the financing of the deal to acquire Twitter.
April 26, 2022 / 09:52 PM IST
Logo of electric vehicle manufacturer Tesla, which is headed by Elon Musk (Image: Reuters)
Tesla Inc's stock dropped by over nine percent during early trading hours on April 26, in what was seen as an adverse impact of the finalisation of deal between company's CEO Elon Musk and Twitter Inc for the latter's acquisition.
The electric car-maker's shares were trading at $905.95 a piece at Nasdaq at the time of writing this report, which was around 9.2 percent or nearly $92 lower as compared to the previous day's close.
The slide comes a day after Twitter announced that it has entered into definite agreement with Musk to sell the microblogging site for $44 billion or $54.20 per share.
The timing of the dip in Tesla's shares suggests that the company's investors are concerned about the Twitter deal. Their apprehensions are linked to the acquisition's financing, as Musk would be raising $12.5 billion in loans against his Tesla stock.
To double the $33.5 billion Musk is contributing out of his own fortune to the buyout, Twitter's value would have to go up by 1.4 times. Had he put in only a third of the deal consideration as equity, Twitter's value would have to go up by only 0.7 times for that money to double.
What is more, Musk has agreed to take out a risky $12.5 billion margin loan, secured against his stock of Tesla to pay for some of the $33.5 billion equity check. Were Tesla's stock to drop by 40 percent, he would have to repay that loan, a regulatory filing shows.
Musk said last week that he did not care about the economics of the deal "at all" and that he was pursuing the acquisition because it was "extremely important to the future of civilization."