Twitter Storm: Tesla valuation down $126 billion amid investor worry
The valuation of the electric car company has been going down the hill ever since its billionaire owner revealed that he had picked up nine per cent stake in Twitter on April 4.
Tesla stocks slumped 12 per cent at the Nasdaq over concerns that the company's founder and Chief Executive Officer Elon Musk may have to sell a chunk of his stake in the company to pay the $44 billion he committed in order to purchase Twitter.
In other words, investor concerns tanked the valuation of the company by $126 billion. And this is just after Monday's announcement by the Board of Directors at Twitter that Musk's deal had been accepted.
The valuation of the electric car company has been going down the hill ever since its billionaire owner revealed that he had picked up a nine per cent stake in Twitter on April 4.
Since that day, Tesla's market capitalization dropped by $275 billion or 23 per cent. According to reports, the dollar value of Musk's 17 per cent stake in Tesla has taken a hit of more than $40 billion. That's almost double the equity portion that he pledged for the Twitter deal.
What is really worrying investors is that the billionaire is yet to give concrete details of how he intends to cover the $21 billion equity he has committed to deliver. Documents shared with the US Securities and Exchange Commission show that Musk is using Tesla shares as collateral in the transaction.
In its latest annual report submitted in February this year to the SEC, the company noted that 'if Elon Musk were forced to sell shares of our common stock that he has pledged to secure certain personal loan obligations, such sales could cause our stock price to decline.'
'Some banking institutions have made extensions of credit to Elon Musk, a portion of which was used to purchase shares of common stock in certain of our public offerings and private placements at the same prices offered to third-party participants in such offerings and placements. We are not a party to these loans, which are partially secured by pledges of a portion of the Tesla common stock currently owned by Musk. If the price of our common stock were to decline substantially, Musk may be forced by one or more of the banking institutions to sell shares of Tesla common stock to satisfy his loan obligations if he could not do so through other means. Any such sales could cause the price of our common stock to decline further,' it added.