Elon Musk could have to sell up to $10 billion in Tesla stock next week to complete his Twitter buyout, according to Dav Ives of Wedbush.”The more investors that bail on this deal is the more money that Musk needs to contribute and therefore sell more Tesla stock,” Ives said.Ives called Musk’s $44 billion deal for Twitter a “train wreck.” Loading Something is loading.
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Elon Musk could be forced to sell $5 billion to $10 billion in Tesla stock next week as he prepares to complete a $44 billion buyout of Twitter, Wedbush analyst Dan Ives said in a Friday note.
Musk currently has $12.5 billion lined up in debt financing, but he’s seeking outside investors to come in and help foot the other $32 billion that he needs to finish the deal. The currently bleak stock market environment makes Musk’s sell to investors about the potential for Twitter that much harder.
“It’s pretty simple, the more investors that bail on this deal is the more money that Musk needs to contribute and therefore sell more Tesla stock,” Ives said. The deal has a completion deadline of October 28, which means Musk is facing a make or break week ahead and any selling of Tesla shares is likely to happen next week.
Ives described the situation as “brutal” for Tesla investors, as they will ultimately have to “bear the burden” of Musk’s potential stock sales.
The stock sales by Musk would come at a time when the electric vehicle company is considering its first ever stock buyback of between $5 billion and $10 billion, as mentioned on Wednesday’s third-quarter earnings call.
But any such stock buyback by Tesla would seem to be washed out by the potential for a similar amount of stock sales by Musk.
And what makes matters even worse, according to Ives, is that Musk’s deal to buy Twitter isn’t a good one based on its current price tag.
“The $44 billion Twitter price tag is simply a train wreck for an asset that we peg fair value in the $30 billion range best case in the midst of Everest-like uphill growth challenges,” Ives said. Musk agrees, saying on Wednesday that he is “obviously” overpaying for the company.
Recent reports suggest Musk could be quick to reduce Twitter’s headcount by as much as 75% when he takes over the company, but Ives is skeptical that such deep cuts would make the deal any better.
“Clearly, massive headcount cuts and expense controls need to take place on a leveraged $44 billion deal and Twitter is long overdue for expense reductions given the lack of growth. However, Musk cannot cut his way to growth with Twitter and a number in the 75% zip code would be way too aggressive in our opinion out of the gates and potentially set back this core platform for years,” Ives said.