- US tech takes a pounding
- Tesla hit by Musk's Twitter bid financing
- European stocks take lead from Wall Street
Whoops...Tesla (TSLA) shares plunged 12 per cent on very high volumes as investors worried that Elon Musk would be forced to sell down a tonne of his stock to finance the $21bn cash element of his Twitter purchase. Twitter (TWTR) shares also fell nearly 4 per cent to under $49.68, about 10 per cent below the offer price. Whilst this was against a backdrop of broad-based tech selling with the Nasdaq down almost 4 per cent, it underscores that investors are naturally anxious about what Musk is up to and whether he can pull it off. For now, he is said to be in talks with other investors about helping to stump up the requisite $21bn... but as I asked yesterday: who’s going to hand over, say conservatively, $200m for a stake in a private company with free cash that won’t even cover the interest on the buyout? Could Musk’s ultimate plan be to re-float Twitter a year from now, the offer sprinkled with a touch of Musk-y stardust – a new WallStreetBets/cult type stock? I don’t know the answer to this question, but it’s interesting to think about what might be going on.
Or could he still walk away? Certainly a $21bn cheque is a lot even for him to write. A $1bn break fee might in the end seem less painful. Is it all a ploy to get rid of more Tesla stock at these still lofty – albeit not ATH lofty – levels without attracting criticism? Sell the TSLA now saying it’s for Twitter purchase then find a due diligence type reason further down the road to pull out? I don’t know. The amount of Tesla stock collateral MS is requiring for the other bit of the purchase is revealing too since it indicates that corporate financiers at the bank are maybe a touch more sceptical on the stock than their auto analyst, who has a price target of $1,300. Maybe Musk is already selling and that’s why it’s down…