Shares of Tesla plunged more than 12% in the session on Tuesday, on the news that its CEO, Elon Musk , will buy Twitter . The fall is synonymous with losing some 126,000 million dollars of market capitalization in a single day, almost three times what the billionaire will have to pay to take over the social network.
After the sharp decline -made up only by the advance of 0.6% on Wednesday- is the fear of investors that Musk will sell part of the shares of the electric car manufacturer that he owns to carry out an operation that will be settled by about 44,000 million dollars.
Under the terms of the offer, Musk will pay $54.2 in cash for each share of Twitter. This amount represents a premium of 54% compared to January 28, when the Tesla CEO began buying shares of the social network, as well as 38% if April 1 is taken into account, the last day of trading before that it revealed that it already had a 9.2% position.
In reality, the poor performance of Tesla stock dates back to that time. Since then, the company has lost almost 19% of its value in the market, going from a market capitalization that was around 1.18 billion dollars to almost 908,000 million today.
Financing for the purchase of Twitter
To carry out the purchase of Twitter, Musk has secured financing worth 25,500 million dollars, of which 12,500 correspond to a loan guaranteed with Tesla shares, and another 13,000 through lines of credit, in both cases thanks to to major Wall Street banks.
That is one of the risks that the purchase of Twitter has for Tesla. According to the documentation sent to the US regulator, Musk will commit an undetermined number of shares before the total closing of the financing and the lower the market price, the more titles he will have to put up as collateral.
But the biggest drag on Tesla’s price is the 21,000 million that Musk still needs to take over Twitter and that he could obtain by selling part of his stake in the manufacturer of the famous Model 3. He could also get rid of a percentage of SpaceX or Boring, but Analysts opt for the first option, since these two companies, also founded by the tycoon, are not listed on the Stock Exchange and, therefore, have less liquidity, which makes any operation difficult.
Profits improved by 658%
To finish paying for the purchase, the richest man in the world could use the part of the fortune he has in cash (and that Forbes estimates at about 2,000 million) or his investments in cryptocurrencies . While he finds a solution, his wealth has been greatly reduced. With a 17% stake in Tesla, the latest falls on the stock market have cost him 40,000 million dollars, almost double the 21,000 that he must contribute so that the purchase of Twitter comes to fruition.
The plunge in its shares comes at a great time for Tesla. The company obtained net profits of 3,318 million dollars in the first quarter of 2022 , 658% more than in the same period of 2021, while revenues grew by 81%, to 18,756 million.