Why Tesla Stock Plunged After Musk's Successful Bid for Twitter
Shares of Tesla$Tesla Motors(TSLA)$ (TSLA-0.77%)were down 9.2%. CEO Elon Musk sold a chunk of Tesla stock after reaching a deal to buy Twitter$Twitter(TWTR)$ , pending shareholder approval.
It's not so much the sale but the uncertainty over what happens with Tesla's management in the near term that has investors feeling a little nervous.
Twitter and Musk announced an agreement on April 25, which will hand control of the social media platform to the billionaire's X Holdings entity for $54.20 per share. From April 26 through April 28, Musk sold about 6 million shares of Tesla, worth around $5 billion. Investors presume that Musk will use the proceeds to partly fund the Twitter deal.
There are also concerns about Musk splitting his time over seeing Twitter and running Tesla, which has had a phenomenal run as he has led the growth of a company that issuccessfully competing against top car manufacturersthat have been around for a century.
Tesla trades at a high valuation, so investors expect the company to continue to grow and execute to deliver returns for shareholders. But they worry that the Twitter acquisition brings a distraction to the management of Tesla, and that explains why the stock is down this week.
Tesla has been posting fantastic operating results over the last year. Revenue advanced an impressive 81% year over year in the first quarter, with adjusted earnings per share jumping 246%. The stock has risen 31% in value over the last 12 months.
The company seems to be executing at a high level right now, and higher costs in the supply chain haven't slowed business momentum. It was a record start to the year for theelectric vehiclemaker, and analysts currently expect the company to finish the year with full-year revenue increasing by 62% over 2021.
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