Tesla Stock Drops after Elon Musk’s Twitter Deal

News of Tesla CEO’s plan to take Twitter private has sparked uncertainty for both companies, as plenty of questions remain.

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  • Tesla CEO Elon Musk's announcement of a $44 billion deal to take Twitter private coincided with a drop in both Tesla and Twitter stocks earlier this week, amid market uncertainty over the purpose of the deal.
  • The drop in Tesla's stock price has been attributed to Musk's sale of $8 billion of his Tesla stock to fund the Twitter purchase.
  • Musk has been very active on Twitter in recent years, both in regards to Tesla and to trade in cryptocurrency, generating plenty of interest in Tesla.

    Tesla CEO Eon Musk's surprise bid to take Twitter private on Monday of this week, in a deal estimated to be worth $44 billion, may have captured plenty of headlines earlier this week, but it hasn't brought any immediate market boost to either company.

    The surprise announcement of the deal, which has yet to be completed, sparked plenty of conversation and skepticism about the social media platform's utility to Tesla and SpaceX, with many analysts uncertain about Musk's long term plans for the platform. There appeared to be consensus on one issue: The Tesla CEO purchased Twitter to use it in some form, perhaps as a platform for messaging from his companies, given the fact that Tesla has almost never purchased conventional advertising, rather than add it to his portfolio of companies and take a hands-off approach to its management.

    Just what that use may look like in the coming weeks and months is still uncertain. The platform has often been subjected to intense user reactions to minute changes in its user interface, character length, and level of moderation.

    The Tesla CEO's own hints regarding plans for the platform—including an emphasis on "free speech" and a lesser reliance on paid advertisements to drive revenue—have not inspired any strong reactions from tech and financial industry observers, as the social media platform itself has had issues with profitability for most of its existence and thus has not looked particularly appetizing to other suitors in the past.

    One immediate effect of Musk's purchase of Twitter, however, has been the fairly significant drops in the stock values of both Tesla and Twitter, seemingly absent any exterior forces.

    Tesla stock had dropped a maximum of about 15% from the time the Twitter deal was announced on Monday through Thursday afternoon, losing over $100 billion in value. It recovered a bit in Friday morning trading to a level still almost 8% below its Monday price. The only other major external event this week was the start of Ford F-150 Lightning production, which was certainly not unexpected, but still an event that may have had the potential cast a shadow over Cybertruck plans.

    Another suspected possibility for the drop in Tesla stock had been a sale of Tesla stock by Musk himself in the days since the deal was announced, in order to fund the purchase of Twitter. This has seen been confirmed, with the CEO having sold some $8 billion worth of Tesla stock.

    tesla officially opens gruenheide gigafactory
    The CEO has recently attended the opening of Giga Berlin in Germany, launching the automaker's first plant in Europe.
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    Twitter stock, for its part, dropped by roughly 6% from a high of $52.10 on Monday, to a low of $48.10 on Thursday afternoon. Twitter's stock recovered somewhat on Friday morning, while still tracking below its pre-announcement value.

    A broader issue still appears to be the market's uncertainty about the purpose of the Twitter deal in the first place. The advertising/EV promotion theory, in particular, does not seem to pass inspection as Tesla sales have been strong enough on their own, with the brand not suffering from a lack of awareness in the EV marketplace. The Tesla CEO had also been popular enough on Twitter for years to reap the benefits of engagement with users on a level not enjoyed by any other automotive CEO on the platform. Likewise, SpaceX operations have not evidenced a need for more public outreach.

    Another market concern is the possibility that Twitter will now consume the attention of Elon Musk to the detriment of Tesla, which seems vaguely plausible given how much time the Tesla CEO has been spending on the platform even prior to contemplating putting together a deal to take the social network private. This seems like a logical concern, given the fact that the Tesla CEO could divert more of his attention to managing the social media platform.

    Of course, aside from the granular one-week look at Tesla stock following news of Twitter's planned private takeover, the biggest question (besides how the Tesla CEO plans to change the platform) is regarding the long-term effect this will have on his management of Tesla. Musk has remained fairly tight-lipped this week regarding his plans for Twitter, but Tesla watchers are of course concerned about his attention to the automaker, which has been riding a wave of successes for the past two years.

    What changes should Elon Musk implement when it comes to Twitter, if any? Let us know in the comments below.

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