The Agreement Between Elion Musk And Twitter Makes Tesla Shareholders Concerned, This Is The Cause

Tesla could be a victim of Elon Musk and Twitter. (photo: twitter @tesla)

JAKARTA - Elon Musk's mood swings over his acquisition of Twitter Inc were met with a wave of price increases in the social media company's shares. However, Tesla investors are starting to worry that the billionaire will get poorer.

Musk, who sold Tesla Inc's stake for more than $15 billion earlier in the year to fund a deal with Twitter, has threatened to scrap the takeover. He objected to the large number of fake accounts and this prompted a lawsuit from Twitter to force him to close the deal for an initial offer of $44 billion.

While there's no sign yet of any potential sale of Musk's stake in Tesla, Wedbush analyst Dan Ives warns that the Tesla CEO's interest in closing the deal will weigh on Tesla's stock.

"We see the lingering impact of the sale of Musk's shares as a missing drag, but the big concern is Musk juggling too many balls at the same time," Ives said. "We see minimal benefit to Musk having Twitter for Tesla investors going forward."

Musk also heads the spacecraft manufacturing company SpaceX and is a co-founder of neurotechnology companies Neuralink and The Boring Company.

Twitter shares, which closed at their highest level since April, were down about 2% on Wednesday, October 5 while Tesla was down nearly 6%.

At least three analysts raised their price targets on Twitter shares to match Musk's offering price after he showed renewed interest in buying the company on Tuesday, October 4.

Art Hogan, chief market strategist at B. Riley Wealth in Boston, estimates that Musk may need to sell an additional $2 billion in Tesla, but said it would be difficult to know if he would sell more shares ahead of the company's quarterly results. Tesla is expected to report its quarterly results on October 19.

Fixing Twitter

Musk, a self-described "absolute free speech" and a prominent Twitter user, has been critical of the social media platform. He has called the micro-blogging platform not doing enough on free speech, while criticizing its content moderation policies.

In July, Musk said he could leave without a penalty because the number of bot accounts was much higher than Twitter's estimate of only less than 5% of daily active users being monetizable.

Bots are automated accounts and their use can lead to overestimation of the number of people using the service, a key factor in determining advertising rates and the overall value of the service.

As Musk looks to cut costs, fix issues related to bot accounts, and find new ways to monetize the service. It also has to face the added challenge of navigating an uncertain economic environment.

"Musk's job would be difficult in normal times, but has the added burden of now to face these challenges against a deteriorating and uncertain macroeconomic backdrop," said Rosenblatt Securities analyst Barton Crockett.