Tesla shares fell Monday afternoon following news that chief executive Elon Musk is buying social media company Twitter in a $44 billion (€41 billion) deal.
Shares of the electric vehicle (EV) company were down around 1.6 per cent in late afternoon trading in New York after Twitter said it agreed to be acquired by Musk for $54.20 per share in cash. While Tesla’s stock is down 7 per cent this year, it has significantly outperformed most mega-cap technology companies, the broader market and auto behemoths such as General Motors and Ford Motor Co. Twitter’s shares were up up more than 6 per cent after being halted by the New York Stock exchange.
Twitter will become the latest company for Musk to focus on in addition to Tesla. They also include Space Exploration Technologies, or SpaceX, The Boring Co, and Neuralink.
The resilience of Tesla’s shares this year reflects the company’s deft management of the supply-chain shortages and soaring raw material costs. Its first-quarter results last week further highlighted those advantages, with Tesla reporting strong profits and saying that it was on track to expand production to more than 1.5 million vehicles this year, despite supply challenges.
Still, China’s worsening Covid-19 outbreak is threatening to further complicate shortages, with additional lockdowns and production halts at Tesla’s Shanghai plant potentially upsetting the company’s plans for the year.
As Musk pursued Twitter in a highly public fashion - tweeting his opinions about the platform to his millions of followers and conducting polls - Tesla investors were left guessing about the impact of a deal. Some worried that the Tesla CEO might be required to sell off some of his stake in the EV maker to pay for Twitter. However, Wedbush analyst Daniel Ives on Monday said he does not believe the “Twitter bid will result in a major sale of Musk’s Tesla shares.”
Last Thursday, Musk unveiled a $46.5 billion financing package, which included $25.5 billion in debt from a group of banks led by Morgan Stanley, his financial adviser, and $21 billion in fresh equity. The debt component includes a margin loan of $12.5 billion against his Tesla shares. - Bloomberg, Financial Times