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Elon Musk’s Twitter purchase leads to a steep drop in Tesla stock

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SAN FRANCISCO – Elon Musk’s purchase of Twitter led to a hit of more than $ 100 billion on Tesla’s stock Tuesday, which markedly lowers the CEO’s fortune as he plows into his takeover of the social media giant.

Tesla’s share fell more than 12 percent, bringing the market value down to $ 906 billion – compared to more than $ 1 trillion earlier – a steep drop the day after Musk and Twitter agreed that Tesla’s CEO should take over ownership of the company . Musk has pledged billions of dollars worth of his Tesla shares as collateral for his $ 44 billion takeover of Twitter. If Tesla’s value falls, Musk may be asked to shed some of its shares to meet its borrowing obligations, leading to a downward spiral in his net worth.

Investors have worried about how much Musk is willing to risk because he could sacrifice a stock that has dazzled investors in the hunt for a relative underperformer on Twitter.

Analysts said that Tesla, and thus Musk’s net worth, will be affected by two factors: the amount Musk has committed to the Twitter purchase, and the fear that he will be distracted from his role as Tesla’s CEO. The automaker’s share had recently risen with a strong earnings report after Tesla reported a profit of $ 3.3 billion and more than 300,000 quarterly deliveries despite the challenges of the supply chain.

“Now the fear of Musk selling a snail of Tesla shares to pay for Twitter is becoming an overhang for Tesla,” said Daniel Ives, an analyst at Wedbush Securities. “The easy part for Musk was winning Twitter. The hard part will be fixing it and dealing with the ripple effects on the golden child Tesla.”

Elon Musk buys Twitter for about $ 44 billion

Musk’s net worth reached $ 270 billion last week, according to Forbes. It was down to about $ 240 billion on Tuesday.

Tesla’s stock saw modest declines during the period when Musk’s hunt for Twitter became public, but did not react particularly strongly in part due to doubts about whether he would end up as owner. That changed on Tuesday, the first full trading day after the purchase announcement.

Some of the fear surrounding Musk’s acquisition of Twitter stems from how many Tesla shares he has put at stake for his loans. At times last year, Musk had put more than half of its Tesla shares down as collateral, according to financial archives. The Twitter purchase was expected to increase the share he was willing to risk.

Elon Musk is worth $ 270 billion. He wanted to buy Twitter with an IOU.

And Tesla has warned of the consequences of all that security for their stock. Tesla shares fell sharply last year as Musk sold about 10 percent of its shares, including $ 5 billion over days, to cover a tax bill.

Another divestment could send Tesla’s stock – and Musk’s finances – further down.

“If Elon Musk were forced to sell shares of our common stock, which he has promised to secure certain personal loan obligations, such sales could cause our stock price to fall,” Tesla said in its annual application.

“We are not a party to these loans,” Tesla said. And if the stock price fell, it added that banks could require Musk to sell shares to meet its borrowing requirements.

That would likely cause Tesla’s stock price to rise.

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