Sunday, August 7, 2022
Sunday, August 7, 2022
Home Motoring Tesla lost $126 billion in a single day after Musk’s Twitter deal

Tesla lost $126 billion in a single day after Musk’s Twitter deal

by Dennis Mathu
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Tesla just reported huge profits for their last quarter, $3.3 billion to be exact, the company also enjoys some of the largest margins in the auto industry. Despite this, their stock price has been on a downward trend, however, yesterday was their greatest fall, a loss of $126 billion from their market cap in a single day.

Elon Musk, Tesla’s CEO and co-founder, announced on April 4th that he bought a 9.2 percent stake in Twitter making him the largest shareholder of the social network. Since that day, Tesla’s share price has been falling. On April 26th, it was announced that Musk can go forward and take over Twitter for $44 billion. One day later, Tesla share price fell 12 percent to $876.42 losing a market capitalization of $126 billion. 

Musk is planing to use Tesla shares as collateral in the Twitter transaction, he had already pledged $21 billion equity. This might be the reason investors are worried that he may sell some of his stake to fund the acquisition of Twitter. Many are seeing this as the major reason the automaker has lost 23 percent value since April 4th. Musk’s hasn’t been spared either, his fortune has also gone down by $40 billion which is double what he had pledged. 

Interestingly, Twitter stock also fell on April 26 by 3.9% to close at $49.68, despite Musk agreeing to buy the company the day before for $54.20 per share in cash. According to Reuters, this may have been caused by investor concern that the abrupt decline in Tesla’s shares could lead to Elon Musk having second thoughts about the Twitter deal.

Musk’s Twitter bid aside, slower economic expansion and persistent inflation have generated a broader selloff in equity markets globally. A report by Reuters stated that Nasdaq closed at its lowest level since December 2020 which saw other technology companies like Microsoft and Apple also taking a hit in their valuations. In addition, hikes in U.S. Federal Reserve rates have made investors to shed off high-growth companies. 

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