Musk's Twitter Play Sparks Concerns About Distraction, Stock Sales At Tesla

Elon Musk's offer to buy Twitter sparked concerns among Tesla investors and analysts that the electric carmaker could suffer as the chief executive becomes distracted by his takeover play and the possible sales of Tesla shares to fund the deal.

The billionaire entrepreneur, who also heads rocket company SpaceX, targeted Twitter Inc on Thursday with a $43 billion takeover offer.

The idea of Musk working to close that deal, possibly by selling even more of his Tesla stake, and then overseeing yet another company has Tesla observers worried.

"Elon is distracted. He's got a lot of things going on. He's involved in a lot of different endeavors," said Gene Munster, managing partner at venture capital firm Loup Ventures, which owns shares in Tesla. "This is a one to three months headwind to Tesla's stock."

Shares of Tesla, the world's most valuable automaker, fell more than 9% since he disclosed his more than 9% stake in Twitter last Monday. On Thursday, Tesla's stock fell 3.7%.

While Musk has talked about potential changes he would like to see Twitter make, Tesla faces its own challenges - the need to boost production at new assembly plants in Berlin and Texas, analysts said. Meanwhile, Tesla's Shanghai factory - its largest - has been idled by the COVID-19 crackdown in China.

"Musk is Tesla, and investors don't want to see Tesla lose that leadership edge," Roth Capital Partners analyst Craig Irwin said.

And investors have Musk's own words prior to this foray on which they base their fears. Last year, he said he worked seven days a week - "crazy hours" - splitting time between Tesla and SpaceX. He also leads brain-chip startup Neuralink and tunneling venture the Boring Company.

Another worry is how Musk will finance a potential deal for Twitter, which would include stock sales and massive loans, analysts said.

Wells Fargo analyst Colin Langan said Musk, who holds over a 9% stake in Twitter, would need $39 billion to complete the deal and the sale of more Tesla shares could pressure the stock further.

Tesla executives may pledge their company stock as collateral for loans, but the maximum loan does not exceed 25% of the total value of the pledged stock, according to company policy.

This means that he could borrow $42.5 billion by pledging all of his shares worth $170 billion. But he already pledged over half of his Tesla shares as collateral to secure certain personal indebtedness, according to a Tesla filing last year.

Musk said on Thursday he has the assets to buy Twitter, but has not provided details.

The fortunes of the world's richest person consists largely of stocks at Tesla, and Space X. He sold over $16 billion Tesla shares late last year, $11 billion of which he said would be paid in taxes.

"He is potentially setting himself up for a huge liability down the road," said Howard Fischer, a partner at law firm Moses & Singer and former senior trial counsel at the U.S. Securities and Exchange Commission.