The news of Elon Musk acquiring Twitter has been posted everywhere, and I mean everywhere. The deal will mark one of the largest tech takeovers of all time, and it matters to Tesla shareholders. The funding required for the acquisition will entail $12.5 Billion in loans against Tesla Stock, totalling $25 Billion in committed debt and $21 Billion in equity.
While the intent from Elon Musk is to revive the social media platform, Tesla shareholders have shown some concern regarding the acquisition. Committed debt is one thing, however Elon will now be in charge of three large scale tech giants – leading to the question as to who will fill in the time needed at Tesla. While a genuine concern, it shows the market tends to price in possible events well ahead of time. Tesla Stock has fallen 10% this week, leading losses seen across the wider EV market. While the acquisition will matter to Tesla shareholders, is it really the bad news that has been portrayed.
Will the Takeover Impact Tesla Stock?
As Tesla Bull Daniel Ives put it, the Twitter acquisition deal would never have been ideal circumstance for Tesla shareholders. Ives highlighted that investors are worried about the possibility of upcoming sales of Tesla Stock by Elon, as well as the distraction of owning another company, and taking it private.
While concerns are genuine by Tesla investors, the scale of which the impact of this deal will have are still yet to be known. The internal engine of Tesla will remain the focus for more longer term shareholders, not the movements of Elon Musk in his other pursuits.
Looking at Tesla Stock in 2022
Tesla Stock has held relatively well in 2022 compared to some of the largest tech companies. Tesla stock is down 26% in 2022 while Microsoft is down 19% and Amazon down 18%. This is somewhat significant as Tesla Stock is widely perceived as a more volatile stock, with a long term Beta of 1.43 compared to Microsoft of 0.87.
The bigger question is whether investors really believe Elon would fund his Twitter takeover if it would be detrimental to Tesla and its shareholders. A lot of articles recently published have placed a lot of negative emphasis on Elon Musk and the effect for Tesla shareholders. The timing of the deal is important, we are currently in a market that has seen brutal sell offs in earnings seasons and geo-political conflicts that have tightened the already constrained natural resource market.
Tesla Stock was once the most shorted stock in dollar terms in the history of the market, yet has continued to provide significant gains. This is something that has fascinated me. Daniel Ives said the discussed concerns are causing a “bear festival in the name”, even more so in this current market climate.
What do you think? Let us know in the comments below.
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The content above is strictly for informational purposes only and is not financial advice nor does it constitute a recommendation. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.