Apr 28, 2022 - Economy & Business

Tesla's stock could fall much further

Data: YCharts; Chart: Jared Whalen/Axios

The recent decline in Tesla stock, possibly caused by worries about Musk's successful bid for Twitter, has raised concerns that he barely has the liquidity to raise the $21 billion he needs to provide in cash to pay for his new platform.

By the numbers: If you exclude stock that Musk has pledged to secure loans, the value of his freely-sellable Tesla shares is only about $11 billion. In order to find the extra $10 billion, he might have to exercise some of his stock options. That's expensive, since he'd need to pay income tax, rather than lower long-term capital gains tax, on such sales.

  • What goes down can go down much further: Tesla stock is about 33% below its all-time high. Yet Facebook has performed much worse than that, while rival electric carmaker Rivian is down more than 80%.

A continued decline in Tesla shares could cause margin calls and a lot of forced selling by Musk, which in turn would tend to drive the stock lower still.

  • Lauren Silva Laughlin and Gina Chon of Reuters Breakingviews have already gone so far as to predict that Musk will never own Twitter.

The bottom line: Musk is that rarest of billionaires: one who's always keen to put his wealth to use, rather than just watching it rise, or giving it away.

  • A $44 billion purchase, however — almost certainly the largest amount of money ever spent by a single human on anything — might be too large a bite, even by Musk's standards.
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