Tesla Inc lost $126 billion in value on Tuesday as investors are worried that CEO Elon Musk would have to sell stock to fund his $21 billion equity contribution to Twitter Inc’s $44 billion takeovers.
Although Tesla is not engaged in the Twitter deal, its stock has been targeted by speculators. It is because Musk refused to reveal publicly where the money for the acquisition is coming from. The 12.2 percent decrease in Tesla’s stock on Tuesday equaled a $21 billion drop in the value of his Tesla holding.
Concerns over Musk’s forthcoming stock sales, as well as the prospect that he is becoming distracted by Twitter, impacted Tesla shares, according to Wedbush Securities analyst Daniel Ives. He said, “This (is) causing a bear festival on the name.”
A request for comment from the company was not immediately returned.
To be clear, the company’s shares fell amid a difficult environment for many technology-related stocks. On Tuesday, the Nasdaq fell to its lowest level since December 2020. Investors feared a slowing global economy and more aggressive rate hikes from the US Federal Reserve.
Tesla stocks
Musk agreed to buy Twitter for $54.20 per share in cash on Monday. Still, twitter’s stock fell 3.9 percent to settle at $49.68 on Tuesday.
The widening spread underscores investor anxiety that the sharp drop in Tesla’s stock may cause the world’s richest person to reconsider the Twitter acquisition. This stock accounts for the majority of Musk’s $239 billion fortune.
“If Tesla’s share price continues to remain in freefall that will jeopardize his financing,” said OANDA senior market analyst Ed Moya.
Musk also took out a $12.5 billion margin debt connected to his Tesla equity as part of the Tesla acquisition. He’d already taken out a loan against nearly half of his Tesla stock.
Investors became concerned about a “cascade of margin calls” on Musk’s loans, according to University of Maryland professor David Kirsch. His research focuses on innovation and entrepreneurship.