Tesla lost $126 billion from its valuation in a single session on Tuesday, with the stock falling 12% as investors fear Elon Musk may sell shares to complete its acquisition of Twitter for 44,000 million dollars.
The electric vehicle maker’s market capitalization is already down nearly $275 billion since April 4, when Musk revealed that he increased his share of Twitter, as the stock has lost about 23 percent. The dollar value of Musk’s 17% stake in Tesla it has been reduced by about $42 billion, nearly double the portion of capital it pledged in the Twitter transaction.
The price of tesla stock is sinking amid a sell-off in stock markets around the world due to slower economic expansion and persistent inflation. In addition, investors have fled from high-growth companies as the Federal Reserve (fed) is preparing to embark on a series of significant rate increases.
But Musk he’s doing Tesla no favors by providing scant details about how he’ll cover the $21 billion portion of capital he personally guaranteed.
What is known is that Musk is using Tesla stock as collateral in the transaction. That has led investors to worry that Tesla’s chief executive may sell some of his stake to finance the Twitter acquisition.
“Tesla has three strikes against it today,” said Arthur Hogan, chief market strategist at National Securities Corp. “In addition to concerns about stock sales and a broader sell-off in growth stocks, Tesla stock also reflect some concern that Elon Musk might be stretching himself and/or his team too far by taking on this new challenge.”
Still, let’s not forget that Tesla reported excellent quarterly results last week. And before Tuesday, its stocks were the best performers among high-profile growth stocks in the NY FANG+ Index this year.
Still, the risks to the share price of Tesla persist as uncertainty continues.
“Musk is taking a big risk by using Tesla stock as collateral,” said Russ mold of AJ Bel. “If the electric carmaker’s shares were to drop unexpectedly, that could create a lot of discomfort.”