Tesla Shares Sank Tuesday, and the Questions Began

The big one: If share value keeps dropping, how does that impact the Twitter deal?
By Kate Seamons,  Newser Staff
Posted Apr 27, 2022 8:56 AM CDT
Tesla Shares Sank Tuesday, and the Questions Began
Elon Musk speaks at the SATELLITE Conference and Exhibition March 9, 2020, in Washington.   (AP Photo/Susan Walsh, File)

Tuesday wasn't a good day for the markets in general, but it was particularly unkind to Tesla, whose shares closed down 12.2%. That erased more than $125 billion from the electric vehicle maker's market value, and it has some analysts wondering whether that could turn into an issue in terms of Elon Musk's Twitter purchase. The big numbers:

  • Bloomberg supplies some easily digestible math, reporting the $44 billion deal is to be financed in three ways: "$13 billion in bank financing backed by the social-media company, $12.5 billion secured by some of his Tesla stake, and another $21 billion in equity."
  • Fortune reports Musk will have to post $62.5 billion of Tesla stock to secure the $12.5 billion margin loan—which makes a decline in the value of his Tesla shares potentially highly problematic. The stock closed at $876.42; Bloomberg reports that should it sink below $740, he wouldn't be able to cover the full $12.5 billion. Were that come to pass, Musk would have to pull together the cash to pay back the loan, which could cause him to sell shares of Tesla.

  • And that very move could push the share price down further. NPR points out Tesla spoke of the impact of such a scenario in a February SEC filing: "If Elon Musk were forced to sell shares of our common stock that he has pledged to secure certain personal loan obligations, such shares could cause our stock price to decline."
  • Twitter's financial picture is equally tenuous. As of the end of last year it held more than $4.2 billion in long-term debt, and Musk's purchase would add that additional $13 billion. Twitter could be staring down an annual $1 billion interest payment—with expected cash flows of $1.43 billion in 2022 and $1.85 billion in 2023, per the Washington Post. "At that level, the company will be forced to use the majority of its cash simply to service its debts," notes Fortune.
  • Tesla shares opened about 2% higher on Wednesday.
(Read more Tesla stories.)

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