Musk’s Twitter game raises concerns over distraction and Tesla stock sales

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By Hyunjoo Jin and Chavi Mehta

(Reuters) – Elon Musk’s bid to buy Twitter has raised concerns among Tesla investors and analysts that the electric car maker could suffer as the chief executive is distracted by his picking game control and possible sales of Tesla stock to fund the deal.

The billionaire entrepreneur, who also runs rocket company SpaceX, targeted Twitter Inc on Thursday with a $43 billion takeover bid.

The idea that Musk is working to get that deal done, perhaps selling even more of his stake in Tesla and then overseeing another business has Tesla watchers worried.

“Elon is distracted. He’s got a lot going on. He’s involved in a lot of different businesses,” said Gene Munster, managing partner at venture capital firm Loup Ventures, which owns shares in Tesla. “That’s a one to three month headwind for Tesla stock.”

Shares of Tesla, the world’s most valuable automaker, have fallen more than 9% since revealing its more than 9% stake on Twitter last Monday. On Thursday, Tesla stock fell 3.7%.

While Musk has talked about potential changes he’d like to see made to Twitter, Tesla faces its own challenges – the need to ramp up production at new assembly plants in Berlin and Texas, analysts said. Meanwhile, Tesla’s Shanghai factory – its largest – has been slowed by the COVID-19 crackdown in China.

“Musk is Tesla, and investors don’t want to see Tesla lose its leadership,” said Craig Irwin, analyst at Roth Capital Partners.

And investors have Musk’s own words before this foray on which to base their fears. Last year, he said he worked seven days a week – “crazy hours” – splitting his time between Tesla and SpaceX. He also runs brain chip startup Neuralink and tunneling company The Boring Company.

Another concern is how Musk will finance a potential deal for Twitter, which would include stock sales and massive loans, analysts said.

Wells Fargo analyst Colin Langan said Musk, who owns more than 9% stake in Twitter, would need $39 billion to close the deal and selling more Tesla stock could exercise additional pressure on the title.

Tesla executives can pledge their company’s stock as collateral for loans, but the maximum loan is no more than 25% of the total value of the pledged stock, per company policy.

That means he could borrow $42.5 billion by pledging all his shares worth $170 billion. But he has already pledged more than half of his Tesla shares as collateral to secure certain personal debts, according to a Tesla filing last year.

Musk said Thursday he had the chops to buy Twitter, but didn’t provide details.

The world’s richest person’s fortune largely consists of shares in Tesla and Space X. He sold more than $16 billion worth of Tesla stock at the end of last year, including $11 billion , according to him, would be paid in taxes.

“He is potentially exposing himself to enormous liability,” said Howard Fischer, a partner at law firm Moses & Singer and former senior counsel at the U.S. Securities and Exchange Commission.

(Reporting by Hyunjoo Jin in San Fracisco, Chanvi Meta in Bangalore; additional reporting by Chris Prentice. Editing by Ben Klayman and Bernard Orr)

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