Tesla shares fall after CEO Elon Musk agrees to buy Twitter in $44 billion deal
- While stocks of the EV giant Tesla are down 7% this year, the company has significantly outperformed most mega-cap technology companies.
The shares of EV giant Tesla fell Monday afternoon following news of CEO Elon Musk buying the social media company Twitter in a $44 billion deal. Shares of the electric-vehicle company ended 0.7% lower after reports of Twitter saying th it agreed to be acquired by Musk for $54.20 per share in cash. The shares were among the five biggest weights on the S&P 500 Index, which rose 0.6%.
The weakness in Tesla shares could reflect investors' worrying “a bit about focus,", yet the reaction is unwarranted, Roth Capital Partners analyst Craig Irwin told Bloomberg. “Tesla is in his blood, so I’m not worried about Musk taking on another project," he said. Stocks of Twitter were up more than 6% after being halted by the New York Stock exchange.
Also check these Cars
Also Read : Tesla issues second recall for vehicles equipped with Boombox feature
While stocks of the EV company are down 7% this year, the company has significantly outperformed most mega-cap technology companies, the broader market and traditional auto companies such as General Motors and Ford Motor. Further, the resilience shown by Tesla’s shares this year reflects how the company deftly managed supply-chain shortages and soaring raw material costs.
Tesla released its first-quarter results last week, reporting strong profits and saying that it was on track to expand production to more than 1.5 million vehicles this year, despite supply challenges. However, China’s worsening Covid situation is threatening to further complicate shortages, with additional lockdowns and production halts at Tesla’s Shanghai plant. This could potentially upset the carmaker's plans for the year.
As Musk pursued Twitter, Tesla's investors were left guessing about the impact of a deal. Some worried that the Musk might have to sell off some of his stake in the EV maker to pay for Twitter. However, Wedbush analyst Daniel Ives said he does not believe the “Twitter bid will result in a major sale of Musk’s Tesla shares."
(with inputs from Bloomberg)