Elon Musk's offer to buy Twitter sparked concerns among Tesla investors and analysts that the electric carmaker could suffer as the chief executive becomes distracted by his takeover play and the possible sales of Tesla shares to fund the deal.
The
billionaire entrepreneur, who also heads rocket company SpaceX, targeted
Twitter on Thursday with a $43 billion takeover offer.
The
idea of Musk working to close that deal, possibly by selling even more of his
Tesla stake, and then overseeing yet another company has Tesla observers
worried.
"Elon is distracted. He's got a lot of things going on.
He's involved in a lot of different endeavors," said Gene Munster,
managing partner at venture capital firm Loup Ventures, which owns shares in
Tesla. "This is a one to three months headwind to Tesla's stock."
Shares of Tesla, the world's most valuable automaker, fell
more than 9 percent since he disclosed his more than 9 percent stake in Twitter
last Monday. On Thursday, Tesla's stock fell 3.7 percent.
While Musk has talked about potential changes he would like
to see Twitter make, Tesla faces its own challenges — the need to boost
production at new assembly plants in Berlin and Texas, analysts said.
Meanwhile, Tesla's Shanghai factory — its largest — has been idled by the
COVID-19 crackdown in China.
"Musk is Tesla, and investors don't want to see Tesla
lose that leadership edge," Roth Capital Partners analyst Craig Irwin
said.
And investors have Musk's own words prior to this foray on
which they base their fears. Last year, he said he worked seven days a week —
"crazy hours" — splitting time between Tesla and SpaceX. He also
leads brain-chip startup Neuralink and tunneling venture the Boring Company.
Another worry 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 holds over a
9 percent stake in Twitter, would need $39 billion to complete the deal and the
sale of more Tesla shares could pressure the stock further.
Tesla executives may pledge their company stock as
collateral for loans, but the maximum loan does not exceed 25 percent of the
total value of the pledged stock, according to company policy.
This means that he could borrow $42.5 billion by pledging
all of his shares worth $170 billion. But he already pledged over half of his
Tesla shares as collateral to secure certain personal indebtedness, according
to a Tesla filing last year.
Musk said on Thursday he has the assets to buy Twitter, but
has not provided details.
The fortunes of the world's richest person consists largely
of stocks at Tesla, and Space X. He sold over $16 billion Tesla shares late
last year, $11 billion of which he said would be paid in taxes.
"He is potentially setting himself up for a huge
liability down the road," said Howard Fischer, a partner at law firm Moses
& Singer and former senior trial counsel at the US Securities and Exchange
Commission. © Reuters
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