Tesla shares are down about 3.3% Thursday after its CEO Elon Musk offered to buy social media company Twitter.
Musk offered to buy Twitter for $54.20 a share, or about $43 billion, in a filing published Thursday. He said the social media company needs to be transformed privately. The offer comes a little over a week after another SEC filing first revealed Musk’s 9.2% stake in the company.
Wells Fargo analysts said in a note on Thursday they’re concerned about the distractions Twitter would present for Musk.
“If the deal is successful, there are two concerns from a TSLA shareholder perspective,” the Wells Fargo analysts said. “One, TSLA is currently in the early days of ramping two factories, Austin & Berlin, which will likely double its global capacity. Running Twitter would be a possible distraction for a CEO that already has a full plate. Two, the takeover financing terms are unclear. Elon’s most liquid assets would be his TSLA shares valued at $170B.”
“Therefore, there is a risk if he decides to ell more TSLA shares to fund the takeover, which could put pressure on the stock.”
The acquisition offer is the latest development in Musk’s Twitter saga over the last week. He first disclosed his stake in the social media giant on April 4. He later planned to sit on the company’s board of directors, if approved, but then reversed that decision.
Meanwhile, the Tesla CEO already finds himself in battles with regulators that tend to be public and messy, occasionally including vulgar taunts. Earlier this year, the SEC subpoenaed Musk and Tesla after he informally polled his tens of millions of Twitter followers, asking if he should sell 10% of his Tesla holdings. The majority of his followers voted yes.
Tesla recently achieved two major goals, opening new vehicle assembly plants in Germany and Texas. But now it is in the middle of a covid lockdown in Shanghai that has forced it to suspend production at its factory there. It is also still facing chip shortages, inflationary and other supply chain pressures plaguing the entire auto (and solar) industry.
Twitter shares were up about 4% Thursday morning after closing at $45.85 a share on Wednesday.
