Meanwhile, the Information writes:
Market Jitters Hit Tesla—and Twitter
It seems Tesla shareholders aren’t too happy with Elon Musk’s Twitter deal. And who can blame them? Not only is Musk using his 21% stake in Tesla as a piggy bank to help fund the deal, but the acquisition is sure to distract him from his duties at Tesla.
Tesla shares dropped 12% today to close at $876, which means it has fallen 23.5% since Musk revealed his Twitter stake on April 4. That’s a big deal, for two reasons:
Of the $25.5 billion in loans Musk is taking out to finance the Twitter purchase, nearly half is secured by Tesla shares. Judging by details in securities filing, Musk will have to pledge $62.5 billion worth of shares to cover that loan. The lower Tesla’s stock price, the more shares he needs to put up as collateral.
Musk is also putting up $21 billion in cash to help fund the deal. One way he could raise that money is by selling Tesla shares. But if the price keeps declining, Musk may choose not to sell any shares, forcing him to find other ways to get his hands on the money.
What’s striking about today’s stock action is that Twitter shares also fell 4% today, suggesting investors are less confident that the deal will close. That makes sense. While Musk is the richest man in the world, those riches depend on the health of Tesla’s stock price. And there’s a long way to go before Musk seals the deal.
News this evening that a cratering of the deal would involve a termination fee of just $1 billion—to be paid by whichever side calls it off—also shows the financial penalties for breaking the deal are relatively minimal.
