Elon Musk’s decision to revive his acquisition of Twitter this week was surprising but not unexpected, considering the legal ramifications of the trial starting in a few weeks. The move sparked a rally in Twitter’s stock, an ominous sign for Tesla Inc.
The electric vehicle manufacturer’s shares have struggled since Musk highly publicized an offer to buy Twitter in April, followed by efforts to wriggle out of the deal and later legal move by Twitter.
Tesla’s share price decline was based on concerns that Musk had spread himself thin in this deal. Musk had sold Tesla shares earlier to fund the Twitter buyout. With most analysts expecting the deal to close quickly, there are fears that Musk will need to sell more shares to raise money. According to analysts surveyed by Bloomberg, it is expected that Musk might need to sell Tesla shares worth between $2 billion and $7 billion.
The Edge Consulting Group, a special situation research firm’s founder Jim Osman said that Musk could raise funding from private equity by keeping his Tesla stake as collateral. But most likely, Musk will liquidate some of his holdings.
Osman said that selling Tesla shares was the quickest way to raise funds. However, the acquisition will have a mix of PE funds and cash from shares, as 50% of the $7 billion will come from the share sale.
Selling Pressure
The request for comment from Tesla Representative did not elicit any response.
Musk already sold more than $15 billion of Tesla shares in 2022. He sold $8.5 billion in stock in April and another $6.9 billion in August, and musk tweeted that he had finished selling after both sales.
Since Musk proposed to go ahead with the twitter deal, shares of Tesla fell 1.8% in the next two days. Tesla stock had declined by 34% since April 4, when Musk announced his Twitter stake.
One must, however, remember that Musk holds 465 million shares of Tesla as of august 9, and any sale would only be a fraction of his total holdings. The holding is valued at $110 billion as per data compiled by Bloomberg as per Thursday’s stock price.
According to Greg Martin, co-founder of Rainmaker securities, more selling of Tesla shares will still affect the stock prices as there would be selling pressure.
In an interview, Craig Irwin, an analyst at Roth Capital Partners, said that how much more shares of tesla Musk will have to sell now will depend on where he has parked his earlier sale proceeds, including investing in volatile assets such as cryptocurrency.
