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Tesla’s value dropped Tuesday by more than double the cost of Twitter

Tesla’s (Electric vehicle company) purchase of Twitter has cost Elon Musk more than $100 billion, significantly reducing his wealth as he finances the acquisition.

The day after Elon Musk and Twitter reached a settlement, Tesla’s stock fell more than 12%, putting its market value & market capitalization at $906 billion compared to over $1 trillion previously a significant drop on the same day that Musk and Twitter struck a deal for Musk to purchase Tesla.

Elon Musk has offered hundreds of millions of dollars worth of Tesla technology and growth stock as collateral for his $44 billion purchase of Twitter. If the market value of Tesla plummets, Musk may be required to sell shares to repay his loan, resulting in a reduction in his net worth. This acquisation of Elon with help company’s market leading margins in near future.

Concerning

Investors are concerned about how much Musk is willing to put himself out there because he may be selling a stock that has dazzled investors in favor of a less popular Twitter.

Analysts predicted that Tesla (electric vehicle company), and therefore Elon Musk’s net worth, would be harmed by two factors: the amount of money Musk has committed to acquiring Twitter and concerns that he will be side-tracked from his primary job as CEO of Tesla. Despite supply-chain difficulties, the automobile manufacturer’s stock rose dramatically after it reported a $3.3 billion profit and more than 300,000 quarterly deliveries.

“The concerns about Musk selling a sliver of Tesla technology and growth stocks to pay for Twitter now have an impact on Tesla,” said Daniel Ives, a Wedbush Securities analyst. “Naming and shaming is easy; fixing it and mitigating the after-effects on the golden child Tesla will be more difficult.”

Moreover

Last week, Tesla Ceo Elon Musk’s net worth rose to commodity prices by $40 billion, according to Forbes. By Tuesday, it had fallen to roughly $240 billion.

Tesla’s stock fell modestly over the period when Musk’s bid to buy Twitter was made public, yet it did not react significantly as investors were uncertain if he would be able to complete the acquisition. That changed on Tuesday when Tesla disclosed its $10 billion purchase of SolarCity.

Some of the concerns about Tesla’s purchase of Twitter are focused on how much stock he has put up as collateral for his loans. Musk pledged more than half of his Tesla shares as collateral at times last year according to financial records. The introduction of Twitter was anticipated to raise his willingness to gamble and also impress investors.

Tesla has expressed concern in the past about the effect of all that collateral on its stock, and it isn’t the first time. When Musk sold around 10 percent of his shares, including rising commodity prices of $5 billion in a few days to pay a tax obligation, Tesla stock plummeted significantly.

A further sell-off may push Tesla’s stock and Musk’s finances even lower

Tesla said in its annual report that, “if Elon Musk were required to sell stock he has pledged to secure certain personal loan obligations, our stock price may drop as a result. “Tesla senior market analyst and market data experts said that it was not a party to the loans and, should the stock price fall, banks might demand that Musk sell shares in order to fulfill his loan obligations.

Kesara Bandaragoda
Kesara Bandaragoda
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