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Why is the Tesla share price in focus?

Posted: 16 May 2022 1:41 pm
News
TSLA-shares-16May_1800x1000_Finder

Shares in the electric car maker are down 23% in the past month alone, so why did they rebound today?

Shares in electric car giant Tesla Inc. (NASDAQ: TSLA) have been under the pump for more than a month, as the market continues to sell off growth assets in favour of value plays. But the stock is in the spotlight after rebounding nearly 6% to US$769.59 on the US market in Friday's trading.

What prompted the bounce back in the Tesla stock price?

The lift in Tesla shares comes after the company's controversial CEO Elon Musk cast some doubt over his deal to buy Twitter, tweeting that it was "temporarily on hold" until he can get more assurance that fake or spam accounts on the social platform are less than 5% of the user base.

It was enough to send the Twitter stock tumbling as much as 25% in premarket trading, but shares recouped some of the losses and closed 9.7% lower after Musk sent another tweet saying he is "still committed" to the deal.

Doubts have grown in recent days that Musk would be able to pull off his acquisition of Twitter, and that the billionaire may consider dropping his bidding price for the social media site.

The proposed takeover includes a US$1 billion breakup fee for each party, which the Tesla boss will have to pay if he ends the deal or fails to deliver the acquisition funding as promised.

Growing concerns

Tesla's stock price has sunk amid a broader sell-off in equity markets as investors have fled high-growth companies due to central banks around the world embarking on a series of interest rate hikes to control inflation.

But Tesla investors have been concerned ever since Musk, the world's richest person, signed the deal to buy out all the shares of social networking giant Twitter (NYSE: TWTR) for US$44 billion and take it private.

The concerns have centred around the fact that Musk, whose net worth of US$240 billion is largely made up of Tesla stock, may sell some of his shares to complete the takeover.

Musk has secured US$46.5 billion in financing for the Twitter deal, which includes loans from Morgan Stanley and equity financing personally guaranteed by him, meaning he may need to sell or pledge some Tesla shares as collateral to complete the deal.

Shareholders are also worried that Musk will be distracted by taking on a new challenge with Twitter. The CEO already has a full plate at Tesla as he oversees 2 recently opened factories in Berlin and Austin, Texas that are designed to double the company's global manufacturing capacity.

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