Clouds have gathered over Tesla (TSLA) .
The maker of the perfect electric cars seems to be going through the experience of an abandoned child or a lover who has fallen from grace.
The firm seems to have lost the focus of its charismatic and visionary co-founder and CEO, Elon Musk. Blame it on Twitter (TWTR) It requires a lot of attention because of its great impact on social and political life.
Twitter doesn’t generate profits like Tesla, but the platform is considered the de facto town square of our time, where trendsetters and opinion makers meet. Twitter sets the political agenda of the day and, as a result, the topics of discussion that dominate the mainstream media.
Twitter is the shiny new thing
With this power comes responsibility. Responsibility for the content management policy, which means that you must be aware of it at all times. Any slippage in the content posted on the platform can lead to disputes, which can take a lot of time and energy to resolve.
Twitter cost Musk a lot, $44 billion. The billionaire has about $13 billion in debt, which was secured as part of a leveraged buyout against his remaining stake in Tesla. After coming to power on October 27, he is trying to find sources of income for the social network.
The problem is that, according to the billionaire, the company is losing $ 4 million a day, so he will have to go deeper than that. One by one, advertisers are ceasing to promote their products and services on the platform, which will become a “hellscape” under Musk, a self-described “free speech absolutist.”
Over 91% of Twitter’s revenue comes from advertising.
But the more Musk participates on Twitter, the more Tesla sinks in the stock market. The billionaire told the Baron Investment Conference on Nov. 4 that since buying Twitter, his workload has gone from “78 hours a week to probably 120.”
The serial entrepreneur tried to reassure investors and Tesla fans by saying he is still very busy running the electric car maker.
“I’m still working hard at Tesla! I was in our Palo Alto engineering office until late Thursday night when I had to go back to New York,” he said on Nov. 5.
Market Value has decreased by more than 430 Billion dollars
The message could not calm down. Since then, Tesla’s stock price has continued to fall on Wall Street. Tesla shares fell to a 52-week low of $196.66 at the end of the trading session on November 7.
Tesla shares fell 12.4% after Musk finalized the Twitter deal on Oct. 27. After announcing Musk’s offer on April 25, Tesla shares fell a mere 41.2% to $197.08. This represents a drop in market value of approximately $436 billion. Until now, Tesla, the world’s sixth largest company by market capitalization, was overtaken by Berkshire Hathaway on November 7. (BRK.A) the holding company of legendary investor Warren Buffett.
Therefore, it is not surprising that investors and fans of the brand are worried.
Tesla investor Gary Black tweeted on November 7: “I have dozens of DMs asking why $TSLA is crushed. . As advertisers go, TWTR will need to raise more dollars. @elonmusk needs to bring in 50 brand managers/adv execs.”
A little more than an hour later, Black released another message in which he tried to reassure himself and other Tesla shareholders.
“$TSLA SHs: Keep the faith. @elonmusk will figure out how to fix $TWTR. Meanwhile, TSLA fundamentals remain great, price cut in China brings big orders, $7.5K EV loan is about to go live, and Cybertruck is on deck. . Meanwhile, TSLA is the cheapest since the peak of Covid.”
But Gene Munster, managing partner of Loup Funds, believes Musk may be forced to sell additional Tesla shares if advertisers continue to leave Twitter.
“They’ve got a month here to kind of wash the dishes and make people reset what their product is and make advertisers understand what content moderation is,” Munster said. told CNBC On November 7. “If it fits the current environment, he will have to sell his shares in April.”
The billionaire sold nearly $7 billion worth of Tesla stock in August to fund the Twitter acquisition.
Tesla ‘Will Continue to Grow’
In October, the flamboyant CEO announced that Tesla was considering a massive share buyback program aimed at rewarding shareholders by boosting its stock price.
Those share buybacks will be worth between $5 billion and $10 billion, the tech mogul told analysts on third-quarter earnings call.
“We have discussed the buyback idea extensively at the board level,” Musk said. “The board generally thinks that buybacks don’t make sense. We want to work on the right process for buybacks. But it’s certainly possible for us to buyback with a $5 order. [billion] up to $10 billion even in next year’s downside scenario. Even if next year is a very difficult year, we still have the ability to make $5 [billion] Until the $10 billion buyback.”
In the long term, Munster believes that the Twitter acquisition will not be a particular problem for Tesla, which has a roadmap full of products such as the Semi truck on December 1, the long-awaited Cybertruck in mid-2023, robotaxis in 2024. and the humanoid robot Optimus in 2023.
“Musk buying Twitter means little for the future of Tesla and SpaceX,” Munster wrote in a research note last month. “He will continue to devote the bulk of his energy and time to both companies.”
“Musk’s role at Twitter will be month-to-month. He will bring in a management team that will work with his ideas, and the platform will grow as a result of his presence,” Munster continued.
“Within five years, the company will return as a public company, at which point Musk will sell off some of his holdings. And over the next five years, Tesla and SpaceX will continue to grow and create a fortune that will increase substantially at any loss for Musk. The Twitter investment is in the grand scheme of his wealth.” there will be a rounding error.”