Shares in Tesla crashed by more than 12% yesterday amid investor concerns that chief executive Elon Musk may have to sell a big chunk of his shares to fund this week’s £34.5billion deal for social-media platform Twitter.
The US-based electric-vehicle maker lost £100billion in value on Tuesday - and Mr Musk’s wealth will have taken a substantial hit as he has around 17% of the firm’s stock.
Tesla is not involved in the Twitter deal, yet its shares were targeted by speculators after Mr Musk declined to disclose publicly exactly where his cash for the acquisition is coming from.
To fund the takeover, Mr Musk has secured £20billion of debt and margin loan financing and he is providing a £16billion equity commitment.
Mr Musk is the richest person in the world, with an estimated net worth of more than £200billion.
Wedbush Securities analyst Daniel Ives told Reuters that worries about upcoming stock sales by Mr Musk and the possibility that he is becoming distracted by Twitter had weighed on Tesla shares.
Tesla's share dive came against a challenging backdrop for many technology-related stocks in the US.
The Nasdaq closed at its lowest level since December 2020 on Tuesday, as investors worried about slowing global growth and more aggressive rate hikes from the US Federal Reserve.
Twitter's shares also slid on Tuesday, falling 3.9% to close at £39.48, even though Mr Musk agreed to buy it on Monday for £42.52 per share in cash.
The widening spread reflects investor concern that the decline in Tesla's shares, from which Mr Musk derives the majority of his fortune, could lead him to have second thoughts about the Twitter deal.
"If Tesla's share price continues to remain in freefall, that will jeopardise his financing," said OANDA senior market analyst Ed Moya.
Meanwhile on this side of the Atlantic, Mr Musk has been warned he must protect Twitter users from harmful content.
He has vowed to relax content restrictions - sparking fears from human-rights groups it could lead to a rise in bullying and misinformation.
"Regardless of ownership, all social-media platforms must be responsible," said a spokesman for UK Prime Minister Boris Johnson.
The European Commission also warned Mr Musk that he must protect users.
"Be it cars or social media, any company operating in Europe needs to comply with our rules - regardless of their shareholding," warned Thierry Breton, commissioner for the internal market at the EU executive.
The European Union has said its new online rules will "overhaul" the digital market, including how tech giants operate.
Once they come into force, there will need to be greater transparency around why content is recommended to users, or why they are being targeted with certain ads, for example.
FTSE 100
The UK’s top share index, the FTSE 100, was down five-points earlier today, at 7,380, after a five-point rise yesterday.
Companies reporting today
- Half-year results: WH Smith
- First-quarter results: GlaxoSmithKline, Meta, Spotify
- Trading statements: Drax Group, Lloyds Banking Group, Persimmon, WPP