Tesla Inc. stock rose nearly 3% on Wednesday, taking some of the sting out of a 12.8% decline on Tuesday that led the EV maker to shed $126 billion in market cap this week.
Wednesday’s gains snapped a three-day losing streak for Tesla stock
amid worries that the attention of Chief Executive Elon Musk would be divided with his $44 billion bid for Twitter Inc.
and that Musk may have to sell some of his Tesla shares to fund his portion of the deal, which is fueled in part by some $21 billion in equity financing.
Through April 14, when Musk unveiled his proposal to buy the social-media company, Tesla stock has lost around 8%.
Many on Wall Street believe that Musk would be able to juggle Twitter, Tesla and his other endeavors, including leading privately held Space X, and delegate successfully.
The stickier part seems to be the potential selling of his Tesla shares.
There is “a lot of confusion” about the $21 billion equity component, Wedbush analyst Dan Ives said in a note Wednesday.
The equity commitment “will result in some piece of Musk’s Tesla ownership being sold over the coming year even though a core piece of this financing is likely held as collateral and not actually sold in the transaction,” Ives said.
Musk could bring in private-equity partners to help finance the deal, or he could go at it alone, Ives said.
“Combining this dynamic with the debt taken on as part of the Twitter transition, now a good portion of Musk’s Tesla shares will be spoken for/used as collateral for this deal which is putting near-term pressure on the stock,” the analyst said.
This “has put a black cloud” over Tesla’s stock and provided fodder for the Tesla bears, Ives said.
“While the Tesla story is not impacted, Musk is the hearts and lungs of the Tesla story and the Twitter saga now unfortunately becomes an overhang for Tesla shares in the near-term,” the analyst said.
Tesla last week reported record quarterly revenue and profit, sidestepping factory shutdowns in China and ongoing supply-chain problems.
The stock has lost 14% so far this year, which compares with losses of around 12% for the S&P 500 index
in the same period.
Twitter, meanwhile, was down 2.5% at $48.23, below Musk’s $54.20 offer price, suggesting its shareholders are not convinced about the deal.