Tesla CEO Elon Musk announced he reached a deal with Twitter to buy the company for $44billion (£35billion) to allow him to unlock the platform’s full potential, including as a platform for “free speech”. Musk announced a funding package for the deal which included $21billion (£16.7 billion)of his own money together with debt funding from Morgan Stanley and other financial institutions.
The purchase of the platform received warnings from politicians in the United States, such as Senator Elizabeth Warren and the White House spokesperson Jen Psaki on behalf of the President.
Ms Psaki said: “No matter who owns or runs Twitter, the President has long been concerned about the power of large social media platforms.”
Meanwhile Senator Warren said the deal was “dangerous for our democracy” and added that “billionaires like Elon Musk play by a different set of rules than everyone else, accumulating power for their own gain.”
Tesla’s share value plummeted, despite not being directly connected to the Twitter deal, as concern grew among investors about how Musk was funding the buy-out after he declined to publicly disclose such information.
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The drop in Tesla’s shares were equivalent to the sum of Musk’s personal money he would use in the funding package to buy the social media platform.
Tesla shares dropped by 12.2 percent, which is equal to a $21billion drop in the value of his stake in Tesla, this is the same as the $21billion he said he’d pay to Twitter.
There are worries that the Tesla CEO has become distracted by his takeover of the social media giant which is causing Tesla to suffer.
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Twitter’s shares also dropped by 3.9 percent on Tuesday as OANDA senior market analyst Ed Moya said: “If Tesla’s share price continues to remain in freefall that will jeopardise his financing.”
Part of the Tesla deal led to Musk taking out a $12.5billion (£9.9 billion) margin loan tied to his Tesla stock and he had already borrowed against roughly half of his Tesla shares.
David Kirsch, a professor at the University of Maryland, focuses on innovation and entrepreneurship and said investors began to worry about a “cascade of margin calls” on Musk’s loans.