Musk Sells Tesla Shares Amid Twitter Financial Troubles

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Yujin Cho] Elon Musk, CEO of Tesla, has recently been selling off his shares, which analysts say reflects increasing financial pressure on Twitter.

Bloomberg reported on the 15th (local time) that "despite Musk repeatedly asserting that his Tesla stock sales were finished, his persistent selling indicates growing financial strain on Twitter."

They also pointed out that "Musk's erratic and impulsive approach to social media management has driven advertisers away," noting that privatizing Twitter and Musk's inconsistent tyranny and various irresponsible behaviors have posed risks to Twitter's management.

In particular, the introduction of the paid verification service "Twitter Blue," which confirms the authenticity of user accounts, was intended to increase revenue but instead sparked controversy and backfired, according to the analysis.

Additionally, by using a leveraged buyout (LBO) method to acquire Twitter, Musk saddled the company with a substantial amount of high-interest loans.

Twitter's debt has ballooned from $1.7 billion to $13 billion, more than seven times, with annual interest payments approaching $1.2 billion, Bloomberg reported.

The bigger problem is that half of the debt carries a variable interest rate, meaning interest payments could increase further depending on market conditions.

Musk recently warned of this risk on Twitter, stating, "In a turbulent macroeconomic environment where the Federal Reserve (Fed) is raising interest rates, we must be cautious about debt."

Musk disclosed to the U.S. Securities and Exchange Commission (SEC) that he sold $3.58 billion (approximately 4.6587 trillion KRW) worth of Tesla shares after the market closed the previous day. The shares sold over three days from the 12th to the 14th totaled 22 million shares.

Earlier, in April, Musk sold about $8.5 billion worth of shares and pledged via tweet that he would not sell more. However, he continued to sell $6.9 billion in August and $3.95 billion in November.

In August, after abruptly canceling the Twitter acquisition deal, he again declared that stock sales to raise acquisition funds had ended, but after a legal battle, when he eventually acquired Twitter, he sold additional Tesla shares to raise cash.

Market concerns have spread that Musk may continue selling shares, severely damaging investor sentiment.

The stock price, which was around $400 at the beginning of the year, plunged nearly 60% on this day. Most of Tesla's stock price decline occurred after the Twitter acquisition news broke. Since the end of September, when the Twitter acquisition was announced, Tesla's stock price has dropped 41%. During this period, the S&P 500 index rose 11%, and the Nasdaq 100 index increased 7%.

On this day, Tesla's stock closed at $157.57, shrinking its market capitalization to $497.5 billion. The sharp stock price drop caused the market cap to fall below the $500 billion mark for the first time in two years since November 2020.

The stock price decline also pushed Musk out of the position as the world's richest person. According to Bloomberg's billionaire index, his net worth as of this day was $161 billion, down $2.7 billion from the previous day. Since the beginning of the year, his wealth has plummeted by $109 billion, marking the largest asset decline among billionaires tracked by Bloomberg this year.

Dan Ives, an analyst at Wedbush Securities, said, "Musk has gone from Tesla's superhero to villain," pointing out that his obsession with managing Twitter is a major negative factor for Tesla's stock price.

This content was produced with the assistance of AI translation services.