Opinion: Tesla investors were the biggest losers in Elon Musk’s Twitter deal, and those losses continue
Twitter users have complained a lot about Elon Musk’s initial moves after taking control of the social network, but their complaints seem petty compared to those of Tesla Inc investors. . have to bear.
As the US focused on Tuesday night’s election results, Tesla
TSLA,
CEO Musk has tried to evade the disclosure of his long-awaited stock sales, revealed that he sold nearly $4 billion worth of Tesla stock in the previous three trading sessions. Musk has not publicly mentioned the stock sale nor his intention to sell more within 24 hours of the disclosure, even though he tweeted about 20 times in that period.
[MarketWatch asked him on Twitter to address the sales twice, and did not receive a reply; Tesla disbanded its media-relations department years ago.]
Sales spurred further declines in the electric vehicle maker’s shares on Wednesday, as shares fell 7.2% to $177.59, the lowest closing price since November 2020. Tesla is currently down 49.6% for the year, which would be the worst year for the stock – the previous record annual drop was in 2016, when it fell 11%.
The problem for Tesla investors goes beyond Musk selling stock to possibly pay too much for a company with limited growth prospects and a host of other problems, but the optics are less certain. start from there.
“He sold caviar to buy a $2 slice of pizza,” said Dan Ives, an analyst at Wedbush Securities.
Ives is among those on Wall Street who predict Musk will need to sell more stock to close his financing gap for a $44 billion deal to buy the social media company or provide more operating funds. . In a phone call Wednesday, he said the move on Twitter was “a nightmare that won’t end for Tesla investors.”
One reason it hasn’t ended is that Musk’s cash needs related to Twitter are not made with recent sales, but more in the future. Musk said in a tweet late last week that Twitter had “dramatically reduced revenue” due to Activists pressure advertisers to pull their ads, and he’ll have to keep paying employees he hasn’t fired while saddled with a debt that analysts estimate will cost him $1 billion a year, more than profits Twitter has made over the past two years. Twitter reported a net loss of $221 million in 2021 and a net loss of $1.13 billion for 2020.
Read more about Elon Musk is likely to pump Tesla stock before selling
“First two weeks of ownership is ‘Friday the 13th’order‘horror show,’ Ives said, adding that verification plan and Mass layoffs of 50% of employees — and then tried to convince some engineers, developers, and cybersecurity experts — to be “really stupid.” And, according to CNBCMusk also brought more than 50 Tesla engineers, many on the Autopilot team, to work at Twitter.
“But it fits the way things have been handled,” Ives said, adding that Musk is “passing his skateboard” with the Twitter acquisition.
Amid the chaos of his first two weeks running Twitter, how much time did Musk have to run his other companies? Musk has spent his Tesla time with SpaceX, The Boring Company, Neuralink, and many other endeavors, and now he’s taken on the colossal task of turning a social media company that has never been profitable. high profits, also without value, into something worthwhile. $44 billion he paid.
Ives says the effort has “stained his brand,” which in turn risks a major impact on Tesla. Many investors bought Tesla’s story because they believed Musk was a genius and they supported his vision of electrifying the auto industry. Twitter doesn’t go into that vision, except as a platform for his opinions, reinforcing and promoting more outlandish concepts.
Since Musk began his quest to acquire the company, he has endured more criticism than ever before, with some fans even starting to cast a shadow or question his decisions. For example, investor Gary Black, managing partner of Future Fund LLC, pointed out that top Tesla engineers shouldn’t be running Twitter, where the news is getting worse and worse.
Tesla is not a company that can only run on its own at this point. Musk has stated that he does not want to be CEO but has no one else to take over the car company, which is why he has held the position of CEO for many years. However, it’s not clear how much effort he really put in when trying to recruit someone. Now, when Tesla is faced with his usual myriad of problems, he has stopped spending his time trying to turn to Twitter. into a payment companyor maybe a registered companyor maybe an “everything app” or whatever he comes up with tomorrow.
“Musk needs to look in the mirror and end this constant Twitter fun about the Tesla story, with the focus back on the golden baby Tesla, the company needs his time more than ever on soft macros, production/distribution. Ives wrote in a note Wednesday in which he reiterated a better rating on Tesla stock.
For Twitter to reach anywhere close to the valuation Musk paid for it, it will need a lot of attention from a focused leader, but how can Musk become the leader? there and give Tesla the attention it deserves? The answer is that he can’t, and will most likely give the attention Tesla needs to Twitter after pledging $44 billion (not all of his) to that endeavor. Tesla investors will no longer stare at the sea of red this year has created, and wonder if its leadership is about to sell more stock to fund its other endeavour.
