Elon Musk's decision to revive Twitter offer leads to Tesla stock
Elon Musk's surprising decision to revive his offer for Twitter Inc. this week sparked a rally in the social-media company's shares. It is an ominous sign for Tesla Inc.'s stock.
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The electric-vehicle maker's shares have struggled through the billionaire's highly public pursuit of Twitter, his subsequent attempts to wriggle out of the deal and the lawsuit that brought it all to a head.
Some of the decline is due to concerns of Musk spreading himself too thin. His previous sale of Tesla shares to pay for the purchase has led to a lot of analysts believing that he will need more sales to raise cash. According to Bloomberg News, analysts believe that Musk will need to sell between $2 billion and $7 billion worth of Tesla stock.
Another round of private funding and Musk pledging his Tesla stake for a loan are alternatives to share sales. Jim Osman, founder of Special Situations Research firm The Edge Consulting Group, said that liquidating some stock will likely be part of the plan.
The quickest way to sell Tesla shares is to sell them, he said. I think it will be a mix of all of the above three but with more than 50% of the remaining $7 billion to come through selling of Tesla shares. Representatives for Tesla did not respond to a request for comment. Musk has already offloaded more than $15 billion of the company's stock this year. He sold $8.5 billion of stock in April and $6.9 billion in August. After both sales he tweeted that he was done selling.
Tesla shares are down 1.8% in the two days since Musk proposed to proceed with the deal, lagging the S&P 500 Index's 1.8% advance over that time. The stock has lost 34% since Musk first disclosed a stake in the social-media giant on April 4.
It is worth remembering that any sales would represent a small fraction of Musk's Tesla stake. He held 465 million shares as of August 9, according to data compiled by Bloomberg, which is worth more than $110 billion at Thursday s market levels.
Rainmaker Securities co-founder Greg Martin said in an interview that additional sales by Musk would move the stock. He said that Tesla shares will initially feel selling pressure.
In an interview, Craig Irwin, a Roth Capital Partners analyst, said that Musk parked the proceeds from his previous liquidations could determine how much stock he ultimately has to sell.
It depends on how much cash is invested in more volatile products likecryptocurrencies, as well as how much cash is generated from past stock sales, he said.
None Musk Won t own Twitter until the Shareholders Get Paid.