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Business News/ Markets / Why did Tesla lose $126 billion in value after Musk wins Twitter deal? Find out!
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Why did Tesla lose $126 billion in value after Musk wins Twitter deal? Find out!

Twitter in a statement confirmed that they have entered into a definitive agreement to be acquired by an entity wholly owned by Elon Musk, for $54.20 per share in cash in a transaction valued at approximately $44 billion

Under the $44 billion deal, Musk has secured $25.5 billion of fully committed debt and margin loan financing and he is providing an approximately $21.0 billion equity commitment. (REUTERS)Premium
Under the $44 billion deal, Musk has secured $25.5 billion of fully committed debt and margin loan financing and he is providing an approximately $21.0 billion equity commitment. (REUTERS)

Elon Musk will acquire microblogging and social networking service giant, Twitter. It has been confirmed! The deal was highly anticipated in recent days, however, it sent a frenzy on the stock market with Tesla witnessing a panic selloff.

Tesla lost a whopping $126 billion in value on Tuesday and the reason behind it - was concerns over how the company's chief executive Elon Musk will fund his $21 billion equity contribution to the total $44 billion deal for Twitter.

On Tuesday, Twitter in a statement confirmed that they have entered into a definitive agreement to be acquired by an entity wholly owned by Elon Musk, for $54.20 per share in cash in a transaction valued at approximately $44 billion. Upon completion of the transaction, Twitter will become a privately held company.

In the agreement, Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock that they own upon closing the proposed transaction.

Under the $44 billion deal, Musk has secured $25.5 billion of fully committed debt and margin loan financing and he is providing an approximately $21.0 billion equity commitment.

Although Tesla is not involved in Musk's Twitter deal, however, the automotive and clean energy company's shares have been targeted on the exchanges with investors carrying massive profit booking.

Tesla shares closed at $876.42 apiece down by 12.18%. While Twitter shares also plunged by 3.89% and closed at $49.68 apiece.

As per a Reuters report, the 12.2% drop in Tesla's shares on Tuesday equated to a $21 billion drop in the value of his Tesla stake, the same as the $21 billion in cash he committed to the Twitter deal.

The report cited Wedbush Securities analyst Daniel Ives stating that worries about upcoming stock sales by Musk and the possibility that he is becoming distracted by Twitter weighed on Tesla shares.

"This (is) causing a bear festival on the name," Ives stated.

However, Tesla has not yet commented about the development or the sudden sharp selloff of the share price on stock exchanges.

It needs to be noted though that Tesla's share dipped when technology stocks were in a broader bearish tone.

Tech-heavy index Nasdaq Composite settled at 12,490.74 lower by 3.95% with mega technology stocks taking the most hit amidst earning season. Nasdaq recorded its steepest one-day fall since September 2020. With the latest downturn, Nasdaq has dipped by at least 22% from its record level logged last year in November.

The widening spread indicates investor concern that the precipitous decline in Tesla's shares, from which Musk derives the majority of his $239 billion fortune, could result in the world's richest person having second thoughts about the Twitter deal, as per the report.

Also, the report pointed out that as part of the Tesla deal, Musk had taken out a $12.5 billion margin loan tied to his Tesla stock. He had already borrowed against about half of his Tesla shares.

Analysts believe if the Tesla shares continue to witness free fall - it could to some trouble for Musk in financing the Twitter deal.

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Published: 27 Apr 2022, 06:30 AM IST
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