Tesla shares have been swaying since Elon Musk announced a $44 billion offer for Twitter on April 14th, according to Report.
They are concerned not only about Musk focusing less on high-end electric car manufacturing but also about the possibility of his financial exodus from Tesla. Indeed, the billionaire, whose assets are mainly illiquid, sought loans to fund the Twitter acquisition, including a $12.5 billion margin loan tied to his Tesla shares.
Tesla shares have lost over 29% of their value since the Twitter acquisition was disclosed as a result of this margin borrowing. Investors are concerned that Musk would sell more Tesla stock than the $8.5 billion he has already sold to fund Twitter.
Musk is the brains behind Tesla. He oversees the vision, products, marketing, sales, and senior public relations. Tesla’s stock market gain is fueled by two factors: its vehicles and the serial entrepreneur’s efforts.
After obtaining $7.1 billion in preferred-equity commitments from a group of investors, including Oracle (ORCL), he has already reduced the margin loan. Founder Larry Ellison, Sequoia Capital, Qatar Holding, and Saudi Prince Al Waleed bin Talal Al Saud, a current Twitter stakeholder, are all included in the Oracle Corporation Report.
Musk has apparently secured another $1 billion equity investment since that announcement, according to two individuals who spoke on the condition of anonymity to TheStreet.
The billionaire and his advisers are presently in talks to get more stock commitments, which, when combined with preferred financing, would allow Musk and his lenders to reduce the margin loan and eliminate any financial risk.
The price of Tesla shares would have to continue at $837 or higher to pay a $12.5 billion margin loan, given the Tesla shares Musk holds to back his capacity to borrow money. Musk, though, has flexibility thanks to a $6.25 billion margin loan: Tesla shares might fall as low as $420 and he’d still be able to handle the debt. Tesla’s shares ended at $728 on May 12th.
