Opinion: Tesla investors were the biggest losers in Elon Musk’s Twitter deal, and the losses continue

Twitter users have complained a lot about Elon Musk’s early actions after taking control of the social network, but their complaints are not limited to Tesla Inc. seems small compared to what their investors have suffered.

While focusing on the US election results on Tuesday evening, Tesla TSLA,
Chief executive Musk has tried to avoid disclosing the long-awaited share sales, revealing that he sold about $4 billion worth of Tesla stock in the previous three trading sessions. Musk did not comment on stock sales or plans to sell more in the 24 hours after the announcement, even while tweeting about 20 times during that time.

[MarketWatch asked him on Twitter to address the sales twice, and did not receive a reply; Tesla disbanded its media-relations department years ago.]

The sell-off sent the electric car maker’s stock further lower on Wednesday, when the stock fell 7.2% to $177.59, its lowest closing price since November 2020. Tesla is currently down 49.6%, which will be a long way off. The worst year for the stock was 2016, when the previous record annual decline was 11%.

Musk goes far beyond selling his stock so that he can overpay for a company with problems for Tesla investors, limited growth prospects and a host of other problems, but the poor optics certainly start there.

“He sold caviar to buy a $2 pizza,” Wedbush Securities analyst Dan Ives said.

Ives was one of several on Wall Street predicting that Musk would need to sell more stock to close the gap in financing the $44 billion deal to buy the social media company or provide additional operating funds. In a phone call Wednesday, he said Twitter’s move was a “never-ending nightmare for Tesla investors.”

One reason it hasn’t panned out is that Musk’s need for Twitter-related cash hasn’t been met by recent sales, with more news to come in the future. Musk said on Twitter late last week that there had been a “huge drop in revenue.” activists are forcing advertisers to pull their ads, and he will have to continue paying workers he hasn’t laid off while servicing a debt load that analysts estimate will cost him $1 billion a year. two years. Twitter reported a net loss of $221 million in 2021 and $1.13 billion in 2020.

Read more about Elon Musk potentially pumping up Tesla stock ahead of the sale

“The first two weeks of ownership were ‘Friday the 13th.’c“A horror show,” Ives said, adding that the vetting plan and mass layoff of 50% of employees — and then trying to rehire some of the engineers, developers and cybersecurity experts — was “really stupid.” According to CNBC, Musk has also recruited more than 50 Tesla engineers, many from the Autopilot team, to work on Twitter.

“But that’s consistent with how this business is run,” Ives said, adding that Musk was “stepping over his skis” by acquiring Twitter.

Amid all the chaos of his first two weeks at Twitter, how much time did Musk have to run his other companies? Musk had already split his Tesla time with SpaceX, The Boring Company, Neuralink, and many others, and now he’s taken on the mammoth task of turning a social media company that’s never been highly profitable or valuable into something worthwhile. paid 44 billion dollars.

Ives said the effort “tarnished his brand,” which in turn risks hurting Tesla. Many investors have bought into the Tesla story because they believe Musk is a genius and support his vision to electrify the auto industry. Twitter is not involved in this vision, except as a platform to promote their opinions, vitriol and more irrational concepts.

Since Musk began his quest to buy the company, he has endured more criticism than ever, with even some of his fans beginning to shade or question his decisions. For example, investor Gary Black, managing partner of Future Fund LLC, pointed out that Tesla’s top engineers should not be running Twitter, as the news continues to deteriorate.

Tesla is not a company that can drive itself at this point. Musk claimed that he didn’t want to be CEO, but that there was no one else to take over the car company, so he had been acting CEO for years. It’s unclear how much effort he actually put into recruiting someone. Now, Tesla is spending its time turning Twitter into a payments company, maybe a subscription company, or maybe an “everything app” or whatever comes to mind tomorrow, as Tesla faces the usual myriad of problems.

“Musk needs to look in the mirror and stop the constant Twitter gloating over the Tesla story, focus more on the soft macro, production/delivery-wise golden child Tesla that needs more of its time. Challenges in China and growing EV competition from around the world,” Ives said in a note Wednesday, reiterating his outperform rating on Tesla shares.

It’s going to take a ton of attention from a leader in the spotlight to get anywhere near the valuation Twitter paid for Musk, but how can Musk be a leader? and Give Tesla the attention it deserves? The answer is that he can’t, and it’s likely that Tesla will give Twitter the attention it needs after it has poured $44 billion (not all of it its own) into the business. Tesla investors will be looking at the sea of ​​red it’s created this year and wondering whether its leader will sell more stock to fund other endeavors.

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