Tesla lost more than $125 billion in market cap in a single session on Tuesday, with the company's shares plunging over 12 percent amid growing concerns that Elon Musk might further sell his stake in the company to complete his $44 billion buyout deal of Twitter. Tesla's shares plummeted 12.2 percent to $876.42 on Tuesday.
The electric carmaker's market value has now plummeted more than 28 percent from its all-time high attained in November last year. Those concerns are "causing a bear festival in the name," Wedbush analyst Daniel Ives said. And this plunge comes despite the company delivering robust quarterly results last week.
Tesla Shares His a Low
The big question is how much could Tesla's shares further tumble? The electric carmaker lost $126 billion in market cap in a single trading session on Tuesday, recording its worst single-day decline since January.
At the same time, it also erased $25 billion from Musk's finances, which had already been harmed by his payment to Facebook.
However, Tuesday was just one of the many bad days suffered by Tesla. The EV maker's market value has already declined roughly $250 billion since April 4, when Musk first announced that he had expanded his investment in Twitter. So, the decline is around 23 percent since then.
Musk owns around 173 million Tesla shares, or roughly one-sixth of the company, which has a market value just shy of $1 trillion following Tuesday's drop. Musk's Tesla holding is worth more than $150 billion, making him the world's richest person. However. yet he has used around $60 billion in Tesla shares as collateral for loans.
Taking all these into account, Musk has lost approximately $42 billion in value over the past few months which included offloading of shares. This is about double the equity component he guaranteed in the Twitter deal.
But the concerns arise from somewhere else and that is taking a further toll on the company's shares, with Tuesday being one of those days.
How Will Musk Raise the Money?
When Musk announced he had secured the money to finance the transaction, he said he promised to come up with $21 billion in cash in his $44 billion offer for Twitter.
The concerns arise from here as Musk hasn't yet said how and from where he'll get the money. Musk, right now, isn't helping Tesla by offering scant information on how he plans to raise the $21 billion equity share that he personally guarantees.
What is known is that Musk is using Tesla stock as a form of collateral in the Twitter deal. The prospect that Musk may have to sell or borrow against even more Tesla shares to fund his buyout of Twitter fueled Tuesday's selloff.
Last week, Tesla reported robust quarterly numbers. Prior to Tuesday, its stock had been the greatest performer among the year's high-profile growth stocks despite taking a beating lately. However, that is a different story altogether.
Tech stocks, including Tesla, have been suffering since the beginning of the year as part of a global selloff in equity markets due to sluggish economic growth and persistent inflation. Moreover, as the Fed prepares to further hike rates to check surging inflation, investors have been abandoning high-growth stocks.
There is also growing concern that owning Twitter could put Musk in conflict with the Chinese government over free speech, which is an important market for Tesla and where the automaker produces a considerable number of cars.
Furthermore, there's a chance Musk might get distracted by his recent acquisition as not everything seems to be well inside Twitter since Musk made the announcement. Employees at Twitter are said to be shocked at the news that Musk is suddenly their boss.
Some have expressed fears that Musk, a vocal opponent of labor unions who is worth an estimated $266 billion, could drive down the stock price as he seeks to take the firm private, putting employees who are paid in stock at a disadvantage.