Tesla stock closed down more than 12% on Tuesday as the tech-heavy Nasdaq Composite slipped nearly 4%. Other mega-cap tech stocks like Apple, Amazon, Google and Facebook parent Meta shed more than 3%.
The declines come just a day after Twitter’s board approved Musk’s $44 billion acquisition of the company, showing some of the fall off may be a reflection of investor concerns with the deal. Musk has secured $25.5 billion of fully committed debt, including $12.5 billion in loans against his Tesla stock. The deal also includes $21 billion in equity.
Despite being the world’s richest person, much of Musk’s wealth is tied up in Tesla stock, meaning he would likely have to borrow against his holdings to fund the deal.
Tesla investors also may be concerned about the possible distractions that could come from owning a platform like Twitter. Musk has appeared to want to heavily influence the company’s operations, which could lead to a time crunch for him. Assuming the deal closes, Musk would be in charge of Tesla, Twitter and SpaceX. He also owns two smaller ventures, the Boring Company and Neuralink.
Automakers, including Tesla, are struggling with the rising costs of raw materials that go into batteries, and a semiconductor chip shortage exacerbated by the Covid restrictions in Shanghai. Tesla said in its first-quarter 2022 earnings report on April 20 that, while automotive revenue was up 87% from the year-earlier period to $16.86 billion, the company lost about a month of “build volume” in Shanghai because of Covid shutdowns. Tesla generated around $4.65 billion in China in the first quarter of 2022. The Chinese market now accounts for 24.8% of Tesla revenue.
Tesla has also been exporting cars from China to the broader Asian and European markets. While it recently opened a new factory in Austin, Texas and another in Brandenburg, Germany, the company is just beginning to increase production in these locations.
“For most vehicles, our delivery wait times are quite long. Those cars delivered in Q1 generally carried pricing set in prior quarters, and at levels lower than cars being ordered today,” CFO Zach Kirkhorn said on the company’s earnings call. “Production is resuming at limited levels, and we’re working to get back to full production as quickly as possible,” he later added.
Tesla doesn’t expect to raise prices again soon, either. Musk said on the same call, “The current prices are for a vehicle delivered in the future, like six to 12 months from now.”