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2022-06-20

Elon Musk’s Twitter Takeover Could Sink TSLA Stock

*Investors are still waiting to learn if Elon Musk will acquire Twitter.

*Since the deal’s announcement, both TWTR and Tesla stock have been turbulent.

*Now experts worry that moving the deal forward could compromise TSLA stock further.

Tesla stock has already declined 38% in 2022, but news of Elon Musk’s mission to acquire Twitter (NYSE:TWTR) could further accelerate its downtrend.

For Musk, acquiring a company with a $30 billion market capitalization meant securing multiple sources of funding. He procured $7 billion from different entities including venture capital firm Andreessen Horowitz and tech mogul Larry Ellison. Crypto exchange Binance committed $500 million in equity funding. He also raised $12.5 billion through a margin loan, borrowed against his TSLA stock holdings. Musk backed two-thirds of the total amount with his personal assets, including the margin loan. This was unprecedented and didn’t do much to reassure investors. As Insider reported, “It is unheard of for an individual, even a billionaire, to get a $12.5 billion margin loan.”

TSLA stock began declining after the deal’s announcement and investor confidence has fallen along with it. As Musk is Tesla’s biggest shareholder, these declines compromised his ability to borrow against his personal holdings. He opted to abandon the loan and personally contribute more equity, specifically $6.25 billion, to cover more of the cost.

This news hasn’t slowed TSLA stock’s drop. Robert Ross, founder of tik.stocks and author of A Beginner’s Guide to High-Risk, High-Reward Investing, isn’t optimistic about Tesla’s future. As he sees it, Tesla investors don’t want Musk to have the distraction of running an entirely different company.

“Elon is making a good decision to avoid using margin to back his loan to buy Twitter,” Ross told InvestorPlace. “However, as we’ve seen with Tesla’s stock price which is down 36% since the deal was announced, investors are not happy by the unnecessary distraction that’s come about by this acquisition. As long as this distraction remains, I’ll remain bearish on Tesla’s stock.”


Source : https://investorplace.com/2022/06/experts-agree-elon-musks-twitter-takeover-could-sink-tsla-stock/amp/

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