Elon Musk may be keen on buying Twitter, but investors are less excited. Last Tuesday – the day after Twitter agreed to Musk’s $44 billion (€41 billion) takeover offer – Tesla shares tanked 12 per cent, with the electric car giant losing over $125 billion in market value.
Musk’s Twitter deal was not the sole reason for the sell-off – growth stocks everywhere were slaughtered that day – but it’s clear there is much scepticism about the wisdom of the move.
Back in 2015, Musk said he "wouldn't recommend running two companies", saying it "decreases your freedom quite a lot". If the Twitter deal goes ahead, however, he would be running five companies – Tesla, Twitter, aerospace outfit SpaceX, engineering firm the Boring Company, and neurotechnology company Neuralink. Little wonder multiple Tesla analysts questioned whether Musk is spreading himself too thin.
Shareholders are also wary Musk may end up selling Tesla shares to get the deal done. Musk pledged Tesla shares in order to secure the necessary bank loans. According to Bloomberg calculations, he will need to add more money to meet margin requirements if Tesla shares, which traded around $880 last week, fall below $740.
Is Twitter really worth the hassle? Twitter is a slow-growing, money-losing, 16-year-old firm that couldn’t find a rival bidder to Musk, even though his offer price was almost 30 per cent below last year’s high.
Don’t be surprised if Musk ends up having second thoughts. Last week, Twitter shares were trading some 10 per cent below Musk’s offer price, indicating markets are sceptical as to whether this deal will ultimately get done.
