Elon Musk's Takeover of Twitter Costs Tesla a Customer

 The stock price of a luxury electric car company keeps falling.



Tesla (TSLA) is now covered with clouds.

The maker of high-end electric vehicles appears to be going through a similar experience to that of an orphaned kid or a beloved who has fallen from grace.

Elon Musk, the company's dynamic and forward-thinking co-founder and CEO, appears to have lost interest in it. Put the blame on Twitter (TWTR), which needs a lot of attention due to its enormous effect on public and political life.

While Twitter does not earn money like Tesla, it is nonetheless seen as our generation's equivalent of the town square, where trend-setters and opinion leaders congregate. Twitter sets the daily political agenda and the conversational subjects that eventually predominate in mainstream media coverage.

The hottest new thing is Twitter.

Responsibility also comes with this authority. You are responsible for the content management policy, which requires constant vigilance. Any error in the content that is put on the platform has the potential to spark controversy, which may be difficult and time-consuming to resolve.

Musk paid too much for Twitter—$44 billion. As part of the leveraged buyout, the billionaire owes around $13 billion in debt, which is secured by his remaining Tesla stock. He has been looking for ways to make money for the social network since since he took control on October 27.


But as Musk becomes more active on Twitter, Tesla's stock price declines. At the Baron Investment Conference on November 4, the billionaire claimed that since he bought Twitter, his workload has increased from "78 hours a week to perhaps 120."

The serial entrepreneur made an effort to reassure Tesla's supporters and investors by claiming that he was still actively involved in the company's management.

I continue to work hard at Tesla! I had to take a redeye to New York, so I was in our Palo Alto engineering office until late Thursday night," he remarked on November 5. 


More than $430 billion in market value has decreased

The message didn't reassure anyone. Since that time, Wall Street has seen a continuous decline in the price of Tesla shares. Tesla shares dropped to $196.66 at the close of trade on November 7—their lowest price in 52 weeks. 

 Since Musk sealed the Twitter agreement on October 27, Tesla stock has fallen 12.4%. Tesla shares have lost a total of 41.2% of their value, or $197.08, since Musk revealed his offer on April 25. This results in a market value decline of almost $436 billion. The holding firm of renowned investor Warren Buffett, Berkshire Hathaway (BRK.A), surpassed Tesla on November 7 to become the sixth-largest corporation in the world by market capitalization.

Therefore, it is not surprising that brand supporters and investors are concerned.

Tesla investor Gary Black tweeted on November 7: "I have a dozen DMs questioning why $TSLA getting destroyed today." "News about $TWTR keeps getting worse. TWTR shouldn't be managed by Elon's finest engineers. Threats from Elon don't help. TWTR will need to raise more money as advertisers go out, thus @elonmusk should hire 50 brand managers and ad executives."


Black attempted to comfort himself and other Tesla stockholders in a second statement that he issued a little more than an hour later.

"Keep the faith; @elonmusk will figure out how to repair $TWTR, say $TSLA SHs. The China price decrease has brought in a lot of orders, and the US $7.5K EV credit is going to go into effect. Additionally, Cybertruck is in the works. And TSLA is at its lowest price since Covid's high."

 

However, Gene Munster, managing partner at Loup Funds, thinks Musk would be pressured into selling more Tesla stock if advertisers keep shunning Twitter.

Munster stated to CNBC on November 7 that "they have a month here to sort of kitchen sink things and get people to reset with what their goods are and make advertisers grasp what their content moderation is." If the current economic climate continues, he will have to sell shares in April. 

 In order to pay for the purchase of Twitter, the billionaire sold roughly $7 billion worth of Tesla stock in August.

Tesla says it "will grow"

The zany CEO said in October that Tesla had considering a massive share repurchase scheme, designed to reward shareholders by driving up the share price.

During the call to discuss the third quarter's profits, the tech tycoon informed analysts that this share repurchase will cost between $5 billion and $10 billion.

At the board level, we extensively discussed the buyback concept, according to Musk. "The board broadly agrees that a repurchase makes prudent. We wish to carry out a buyback using the proper procedure. But even in the worst-case situation for next year, it is definitely doable for us to conduct a repurchase on the region of $5 [billion] to $10 [billion]. We still have the capacity to conduct a $5 [billion] to $10 [billion] repurchase even if next year is really challenging."

Munster thinks that Tesla won't experience any particular issues in the long run as a result of the Twitter acquisition because the company has a roadmap full of products, including the Semi truck, which will be released on December 1; the eagerly anticipated Cybertruck; the robotaxis; and the human robot Optimus, which will be released in 2023.

In a research report published last month, Munster stated that "Musk owning Twitter signifies relatively little to the future of Tesla and SpaceX." He will keep devoting the majority of his efforts and time to both businesses.

"At Twitter, Musk will have a month-to-month contract. His management team will implement his ideas, and his engagement will cause the platform to expand "Munster kept going.

Tags

Post a Comment

Previous Post Next Post

Contact Form