Tesla stock falls 12%; $126 bn wiped off post Musk's Twitter deal

Tesla chief executive Elon Musk was able to clinch the Twitter deal by giving a sweet offer to shareholders but this has wiped around $126 billion off the electric car major's valuation on Tuesday. The stock fell 12.18% to $876.42 over reports that Musk could sell some of his stake in Tesla to fund the $21 billion equity commitment he guaranteed to close the $44 billion takeover deal.

The Tesla stock is falling consistently over the past week. The stock fell nearly 14.9% in the past five days amid the global selloff and recent news about Musk's Twitter bid. Since April 4, when Musk announced he increased his Twitter stake, the Tesla stock has dropped around 23%, wiping off around $275 billion off its market cap.

Musk has finally entered into an agreement to acquire Twitter for $44 billion, three weeks after buying a giant stake in the social media platform. The publicly listed firm will now become a private company owned by Tesla's CEO, who offered to buy at $54.20 per share in cash in a transaction valued at around $44 billion.

The fall in Tesla stock is, however, in line with the broader market scenario, with Nasdaq tumbling to its lowest since late 2020 on Tuesday and other big tech companies Apple Inc, Amazon and Microsoft falling 7.11%, 9.8% and 6.6%, respectively. Investors are exiting big companies since the reports regarding the U.S. Federal Reserve preparing a series of rate hike measures have picked up the pace.

As for the funding part, Musk has secured $25.5 billion of fully committed debt and margin loan financing and is providing around $21 billion in equity commitment. However, how Musk is going to fund his $21 billion equity guarantee is not clear so far. Though it’s not difficult for the world’s richest man with a net worth of $257 billion – he could rope in other investors or pledge some of his shares in Tesla – all that comes at a price. Moreover, doubts over who'll call the shots at Twitter and whether Musk, who already has a lot on his plate with Tesla – SpaceX, and other ventures – will spread himself on the new challenge, remains unclear.

Despite the recent fall in stock price, Tesla has performed well. The stock has gained 24.36% in the past year. Tesla also reported a blockbuster first-quarter financial result with an 87% year-on-year jump in revenue to $16.86 billion. Its margin jumped 32.9% and a net profit stood at $5.54 billion.

Meanwhile, the Twitter shares also ended 3.89% lower at $49.68 apiece on Tuesday. In the year-to-date period, the share has gained 16.46%. The deal brings a lot of money for Twitter shareholders. They will receive $54.20 in cash for each share of Twitter common stock that they own upon closing the proposed transaction. The purchase price represents a 38% premium to Twitter’s closing stock price on April 1, 2022, which was the last trading day before Musk disclosed his 9.1% stake in Twitter.