Don’t Worry About Twitter’s Risk to Tesla

Barrons2022-05-02

Like an electric vehicle with a dead battery, Tesla stock has stalled since Elon Musk decided to buy Twitter. But the jitters are overdone—and the stock might be primed for a new charge.Tesla (ticker:...

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Comments

ZEROHERO
2022-05-02
ZEROHERO
He will sell again for tax purposes. Wonder before or after the split this round.
hakunaurtata
2022-05-02
hakunaurtata
Really well written, really puts the issue of the Twitter $Twitter(TWTR)$deal into perspective. I fully believe that Tesla is able to naviagte the inherent risks (batteries, raw materials/ supply side risks) better than any of the other automotive companies out there and its only a matter of time before the stock reflects the ginormous lead that Tesla is ahead of the so-called "competition". Only when the tide goes out do you discover who's been swimming naked.
Turbobo
2022-05-02
Turbobo
Ok

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The stock dropped 13% after the announcement, on fear that Musk might be taking on too much debt and would have to sell Tesla shares to fund the purchase—from April 26 through April 28, he unloaded $8.5 billion worth—or would have to borrow too much against his stake. Tesla has slid eight percentage points more than the Nasdaq Composite, which is off 5% since Monday.“The shorts smell blood,” says Gary Black, portfolio manager of the Future Fund Active exchange-traded fund (FFND), which owns Tesla stock.The doubters may be overplaying their hand. Musk agreed to finance a bit more than half of the deal with debt and the rest with equity, which means $21 billion worth. That’s entirely manageable for Musk and Tesla investors.Investors don’t have to look too far back to see what happens if Musk sells. In November, after he ran a Twitter poll asking if he should sell shares to pay taxes, he unloaded $16 billion worth of Tesla stock. The shares fell 16% in the two days after the poll, bottoming out around Nov. 15. That short-term decline works out to roughly less than 1% per billion of Musk sales, or about 20% this time around, if Musk covers the entire equity part of the deal.But, says accounting expert Robert Willens, some large Twitter (TWTR) shareholders, including funds run by Morgan Stanley, which holds 8.8%, and Elliot Investment Management, which owns 1.3%, could decide to stick around, reducing his outlay. Neither responded to a request for comment. Private-equity firms and “friends of Musk,” such as Oracle’s Larry Ellison, could also invest. Musk himself tweeted on Thursday that there are no “further TSLA sales planned after today.”Musk is also borrowing $12.5 billion, using Tesla stock as collateral. Right now, he will pledge five times the total value, or $62.5 billion, in Tesla shares. But he won’t be on the hook for more unless the loan’s value rises above 35% of that of the stock pledged. Tesla would have to fall 43% for Musk to get a call from his bankers.The odds of that happening aren’t negligible—the shares fell more than that in 2020—but even a drop that size would force Musk to sell about $3.5 billion more in stock, not a huge amount.Musk can handle it, even with so much stock pledged. Given prior pledges, made when Tesla stock was much cheaper, he might have half of his holding—some $73 billion worth—serving as collateral. That leaves an estimated $73 billion unencumbered to sell or pledge, though the exact amount won’t be known until the proxy statement is released. He also has roughly $40 billion in vested stock options, an unknown amount of crypto, and a $40 billion to $50 billion stake in SpaceX. If he wanted to, he could just pay cash, funded by a secondary sale of Tesla stock managed by a broker.The least worrisome of Twitter-related risks is that Musk will be distracted. On the day after Musk’s bid was accepted, biographer Walter Isaacson tweeted, “Late last night, after winning his battle for Twitter, @elonmusk was in Boca Chica [Texas] and held his regular 10 p.m. meeting on Raptor engine design, where he spent more than an hour working on valve leak solutions....He can multitask.”“Zero distraction-related risk,” says New Street Research analyst Pierre Ferragu, who has a Buy rating on Tesla, with one of the highest price targets: $1,580, some 81% above Friday’s close of $870.76.The real risks might be elsewhere. It’s no coincidence that the stock dropped in the same week that China’s Shanghai Composite lost 1.3%. Shanghai lockdowns, now in their fourth week, are limiting production at Tesla’s largest, most profitable plant, which serves China and Europe. The plant recently restarted with workers living at the facility. “It is imperative that Tesla gets that factory up and running. Otherwise, it is going to crimp its second-quarter results,” says Navellier & Associates’ Louis Navellier.Tesla also has to deal with rising commodity prices, battery shortages, and rising competition, including from Ford Motor (F), which launched its electric F-150 truck last week. The stock’s fate might turn on how Tesla manages such risks.Musk has navigated risks in the past, even as the number and size of the companies he controls have expanded. There’s no reason he can’t do the same in the future—Twitter or no Twitter. Analysts believe that Tesla will continue to grow; they’ve raised 2023 earnings-per-share estimates by 12% over the past month, even as the stock fell 20%, a divergence that’s one more reason for optimism.For investors waiting for a chance to buy, the Twitter selloff may be it.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9063593216,"gmtCreate":1651487048470,"gmtModify":1676534914888,"author":{"id":"3566532164444643","authorId":"3566532164444643","name":"ZEROHERO","avatar":"https://static.tigerbbs.com/62813b6df1c4722e559d112fadd5486a","vip":2,"crmLevel":8,"crmLevelSwitch":1,"idStr":"3566532164444643","authorIdStr":"3566532164444643"},"htmlText":"He will sell again for tax purposes. Wonder before or after the split this round.","listText":"He will sell again for tax purposes. Wonder before or after the split this round.","text":"He will sell again for tax purposes. Wonder before or after the split this round.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9063593216","repostId":1103890407,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9063212312,"gmtCreate":1651472691808,"gmtModify":1676534912820,"author":{"id":"3562670436095987","authorId":"3562670436095987","name":"hakunaurtata","avatar":"https://static.tigerbbs.com/5631ba6526d1730e263ae54c0eab70e9","vip":1,"crmLevel":6,"crmLevelSwitch":1,"idStr":"3562670436095987","authorIdStr":"3562670436095987"},"htmlText":"Really well written, really puts the issue of the Twitter&nbsp;<a href=\"https://ttm.financial/S/TWTR\">$Twitter(TWTR)$</a>deal into perspective. I fully believe that Tesla is able to naviagte the inherent risks (batteries, raw materials/ supply side risks) better than any of the other automotive companies out there and its only a matter of time before the stock reflects the ginormous lead that Tesla is ahead of the so-called \"competition\".&nbsp;Only when the tide goes out do you discover who's been swimming naked.","listText":"Really well written, really puts the issue of the Twitter&nbsp;<a href=\"https://ttm.financial/S/TWTR\">$Twitter(TWTR)$</a>deal into perspective. I fully believe that Tesla is able to naviagte the inherent risks (batteries, raw materials/ supply side risks) better than any of the other automotive companies out there and its only a matter of time before the stock reflects the ginormous lead that Tesla is ahead of the so-called \"competition\".&nbsp;Only when the tide goes out do you discover who's been swimming naked.","text":"Really well written, really puts the issue of the Twitter $Twitter(TWTR)$deal into perspective. I fully believe that Tesla is able to naviagte the inherent risks (batteries, raw materials/ supply side risks) better than any of the other automotive companies out there and its only a matter of time before the stock reflects the ginormous lead that Tesla is ahead of the so-called \"competition\". Only when the tide goes out do you discover who's been swimming naked.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":7,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9063212312","repostId":1103890407,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9063219932,"gmtCreate":1651471838326,"gmtModify":1676534912718,"author":{"id":"4090202748844200","authorId":"4090202748844200","name":"Turbobo","avatar":"https://static.tigerbbs.com/fbfb7690052b45745da7270aa672c42d","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"4090202748844200","authorIdStr":"4090202748844200"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9063219932","repostId":1103890407,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":44,"commentSize":3,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1103890407"}