Tesla shares plunged as investors shared concerns about Elon Musk liquidating his Tesla stock to fund his Twitter acquisition.
On Tuesday, April 26, Tesla Inc (NASDAQ: TSLA) stock corrected by a staggering 12% ending the day at $876 levels. Interestingly, this happens soon after Tesla CEO Elon Musk announced his $44-billion takeover of social media giant Twitter.
Tesla CEO Buys Twitter
However, yesterday’s price correction was more in tune with the broader market correction. On Tuesday, the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) corrected 4%. Apart from Tesla, several mega blue chips like Amazon, Apple, Google, and Facebook-parent Meta also corrected more than 3%.
Some analysts have shared skepticism over Musk’s acquisition of Twitter. To finance this $44-billion acquisition, Musk has secured $25 billion of fully committed debt. Furthermore, the billionaire is taking $12.5 billion by pledging his Tesla stock which might lead to investors’ concern.
Investors have concerns that Musk might sell additional Tesla shares to build up the $21-billion cash that he promised to pay Twitter. Over the last year, the Tesla chief has been already offloading the company stock.
Furthermore, Tesla investors have expressed concerns over possible distractions that could come along from owning a platform like Twitter. With the recent takeover, Musk will shoulder the responsibility of three big giants – Twitter, Tesla, and SpaceX. Besides, he also looks after two ventures such as Neuralink and The Boring Company.
Tesla Overcoming Rising Costs and Supply Chain Challenges
Over the last year, automakers worldwide have struggled with the supply chain challenges of semiconductor chips. These issues can pertain longer than expected with cities like Shanghai coming under Covid’s grip once again.
On the other hand, there have been issues with rising costs of raw materials that go into making batteries. Last week, Tesla reported its first-quarter Q1 2022 earnings reporting an 87% revenue jump to $16.86 billion. But due to Covid-related shutdowns, the company has also lost a month of “build volume”. Speaking on the recent earnings call, Tesla CFO Zach Kirkhorn said:
“For most vehicles, our delivery wait times are quite long. Those cars delivered in Q1 generally carried pricing set in prior quarters, and at levels lower than cars being ordered today. Production is resuming at limited levels, and we’re working to get back to full production as quickly as possible”.
However, Elon Musk has assured that Tesla won’t be raising prices anytime sooner. “The current prices are for a vehicle delivered in the future, like six to 12 months from now,” he said.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
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