Tesla Inc. shares dropped about 10% on Tuesday, signaling concerns about Elon Musk stretching himself too thin after his proposed deal for Twitter Inc.
board on Monday agreed to sell the social-media company to Musk for about $44 billion.
Funding for the deal includes $25.5 billion in debt commitments from Morgan Stanley and other financial institutions, and also some $21 billion in equity commitments, including a pledge of some of Musk’s stake in Tesla.
Tesla stock was on pace for its lowest close in nearly six weeks, and its largest one-day percentage decline since Jan. 27, when it fell nearly 12%.
The stock has been in the red for four of the past five days. Since the first news of a possible Twitter deal, Tesla shares have lost more than 8%.
“Whether or not you’re in favor of the Twitter buyout, from a Tesla shareholder perspective, the biggest concern is that Musk ‘gets distracted’ with this purchase and spends less time worrying about how Tesla is going to manage through the year,” said Bill Selesky, an analyst with Argus Research.
That is unlikely to be a problem based on what Musk has been able to do in the past, but “I can see where (Tesla) shareholders would say, ‘how can he manage all the stuff that’s on his plate?’ That’s what I think people are concerned about.”
Musk is the chief executive of Tesla and of privately held Space X.
“We think if anyone can juggle these companies, it’s Elon,” said Garrett Nelson, an analyst at CFRA. “He’s been able to successfully balance growth at both Tesla and SpaceX over the last several years and he’s surrounded by highly a capable supporting cast at each company.”
Nelson on Monday raised his rating on Tesla stock to the equivalent of buy and made it a top pick, based on Tesla’s long-term earnings growth potential and after much better-than-expected first-quarter results.
Tesla has three new vehicles coming up relatively soon: the Cybertruck, an electric pickup truck, the Semi, a commercial truck, and the sports car Roadster.
Sales of the Cybertruck or Semi or both might start later this year, ahead of what Tesla is guiding, which would be another potential catalyst for the EV maker, Nelson said.
Near-term weakness for Tesla, however, includes the concerns that Musk would have to sell some of his Tesla shares in order to fund the acquisition of Twitter.
Tesla reported quarterly earnings well above expectations last week, with Musk focusing on longer-view endeavors for the EV maker, promising a robotaxi vehicle for 2024 and saying the Tesla robot program will be one day among its most profitable ventures.
Tesla shares are down nearly 17% this month, and 15% year-to-date. That compares with a decline of about 7% and 11% for the S&P 500 index
in these same periods.