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Tesla has seen $126 billion wiped off its valuation, following CEO Elon Musk's deal to buy Twitter.
Musk agreed to pay $44 billion for the social media site, partly funded by a $12.5 billion loan secured against his own stake in Tesla. He has secured $13 billion in other loans from Wall Street lenders, but Tesla stock has tumbled with fears he may have to sell further stock in order to make up the $18.5 billion shortfall. He has not yet commented on how he will pay this portion of the price.
Shares in the electric car company dropped by 12.2 percent, to $906 billion from just over $1 trillion, while Musk's own stake in Tesla has dropped by about $21 billion due to the drop in valuation, nearly half of the price he has agreed to pay to purchase Twitter. If the stock plummets too much, it could cause problems for the world's richest man, as the loan is tied to his stake in the company.
"If Tesla's share price continues to remain in freefall that will jeopardise his financing," Oanda senior market analyst Ed Moya told the BBC. Musk has gone on record saying that his purchase of Twitter is "not a way to make money", adding "I don't care about the economics at all". The main appeal of purchasing the site, according to Musk's own statements, is to provide a "free speech" platform for debate.
"Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated," Musk said in a statement on Twitter, right after Twitter announced they had accepted Musk's offer, adding "I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans. Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it."
Stock prices at Tesla may also be tumbling due to investor belief that Musk's attention may be split by the purchase. Running a social media company is not a part-time job, and comes with all sorts of challenges, including EU and other online laws.
