Bhubaneswar: A day after Elon Musk clinched the deal to take over Twitter for $44 billion, the shares of his electric car company Tesla plummeted over 12%, wiping out the company’s value worth $126 billion from the market.
According to market observers, since Tesla was not involved in the deal, Musk has to pay the cash from his own sources. The market sentiment swung against Tesla as Musk has not yet disclosed where he would get the money to pay for Twitter deal.
It is speculated that he would borrow $13 billion as bank loans and $12.5 against his own equity. Since it is expected that he would sell some of his shares in Tesla to meet the rest $20 billion, Tesla shares went on a sale frenzy in the market.
Besides, Musk’s statement on free speech on Twitter is in conflict with policies of China which is a key market for Tesla as it produces the electric vehicles at Shanghai factory. Moreover, Musk’s attention would shift from Tesla after Twitter takeover, the observers feel.
In order to contain the market sentiment, Musk tweeted, “By free speech, I simply mean that which matches the law. I am against censorship that goes beyond the law.”
However, if Musk does offload some of those holdings, it could drive Tesla’s share price down further, an NPR report said. The company had also warned the investors about it in its latest annual report filed with the US Securities and Exchange Commission.
“If Elon Musk were forced to sell shares of our common stock that he has pledged to secure certain personal loan obligations, such shares could cause our stock price to decline,” the company said.
Meanwhile, Twitter’s shares also fell by nearly 4% on the day.
