There are numerous rumours that Elon Musk, the genius behind Tesla (NASDAQ:TSLA), has changed his mind once more and is buying Twitter (NASDAQ:TWTR). The leading manufacturer of electric vehicles (EVs) hasn’t had a good three days on the stock exchanges due to disappointing third-quarter deliveries and an unmemorable AI Day. Musk’s decision to move forward with the Twitter buyout could result in further short-term losses for Tesla stock.
Let’s explore this further.
Does Optimus Lack Impression?
Tesla AI Day 2022: Did it live up to expectations? Did the company’s eagerly anticipated Optimus bot fall short of expectations? I think so. At the AI conference the year before, Musk unveiled the idea of Optimus, a humanoid robot. It was merely a man dressed as a robot. The robot came to life during Tesla’s AI Day 2022 on September 30, with limited movement.
The Optimus prototype did not demonstrate any problematic skills at the show but was observed walking and waving (albeit somewhat clumsily). Tesla did broadcast videos of the robot performing jobs like moving boxes and watering plants at the ceremony, but they weren’t particularly remarkable. Even though the robot has advanced significantly since last year, there is still more to be done to turn Optimus into the super-capable humanoid robot that Musk hopes for. In reality, Optimus appeared to have disappointed many robotics experts. And perhaps investors as well.
Tesla stock price did not increase due to this year’s AI Day. On the other hand, on Monday, the shares fell more than 8%. The weaker-than-expected third-quarter deliveries report took the majority of the heat from investors, even though a lacklustre AI event may have played spoilsport.
Missing Q3 Delivery
The EV titan deliveries increased annually and sequentially, but they fell short of Wall Street’s projections. In the third quarter, the business shipped 343,830 vehicles (325158 Model 3 and Y, and 18,672 Model S and X) across the globe.
Tesla attributes the delivery failure primarily to logistics issues and supplies chain hiccups. The company’s news release noted, “As our production volumes continue to grow, it is becoming increasingly challenging to secure vehicle transportation capacity and at a reasonable cost during these peak logistics weeks.”
Due to a prolonged closure in China, supply-chain issues, and difficulties with installing additional factories in Germany and Texas, Tesla’s two-year series of quarterly delivery increases was broken in the second quarter of 2022. Despite a delivery shortfall in the third quarter of 2022, deliveries increased 35% from the first. However, investors appear to be having difficulty processing the delivery failure. Given the difficulties in the supply chain and the growing prices of commodities, they are likely to maintain their skepticism.
To the Dismay of Investors, Musk Revives the Twitter Deal
Musk is now moving on with his original $44 billion plan to buy Twitter, a move that is expected to put an end to their legal spat. Tesla stock is probably going to suffer. This has also been witnessed before. Tesla shareholders didn’t favourably receive the announcement of Twitter’s takeover.
Early in April, Musk made public his 9% ownership in Twitter. Following the announcement, shares of TWTR surged by 27%, reaching their highest levels since last November. Soon after, Musk revealed his intention to pay a hefty $44 billion for the social media network. To restore free expression through his control of the network, he sought to acquire and privatize Twitter. While the acquisition agreement harmed TSLA stock, it increased the value of Twitter.
On May 13, Musk tweeted that the transaction had been temporarily suspended pending further information and clarification of a problem affecting Twitter’s user base. The CEO of Tesla wanted to ensure that the number of fraudulent or spam accounts on Twitter was not higher than the reported 5% overall. After all, the success and utility of social media are called into question if a large portion of the user base is made up of phoney identities with no genuine person behind them.
His post citing his userbase-related worries caused a massive drop in Twitter share price in pre-market trading. A little while later, he indicated that he was still committed to the purchase, which brought some relief. The acquisition has significantly boosted the price of Twitter shares. Tesla stock rose in the pre-market when he tweeted that the deal was on hold, possibly indicating that Tesla investors would prefer it if the deal wasn’t finalized.
Musk threatened to sever his acquisition agreement on June 6. He filed a 13D form to express his intention to audit Twitter’s “spam” accounts independently and accused the service of “obfuscating” in a “clear, material breach of… obligations.”
Musk declared his intention to cancel the agreement in July when Twitter refused to provide information regarding phoney accounts. Twitter filed a lawsuit against Musk soon after to uphold the original merger deal. Musk responded by filing a countersuit against Twitter, intensifying his legal battle with the social media site. A Delaware judge decided on July 19 that the Musk-Twitter lawsuit will go to trial in October.
Musk declared on October 4 that he intended to proceed with the buyout at his initial price, ending this tumultuous tale. Twitter stock increased 22% on Tuesday as a result of the announcement. In the meantime, Tesla stock lost 3.5% yesterday, ending the day at $240.81 per share. Investors worry that Musk would need to sell additional Tesla stock to pay for the Twitter agreement. So far this year, Musk has sold $15.4 billion worth of Tesla stock. It is anticipated that to finance the deal, he may need to raise an additional $2–3 billion.
Investors in Tesla are concerned that the entrepreneur would become sidetracked by Twitter. Musk is the CEO of Tesla, of course, but he also runs SpaceX, Neuralink, and The Boring Company. The business has established itself as one of the most popularly watched stocks globally and has been one of the most successful bets of the past ten years. The company’s main focus is green vehicles, but it also has other solar-related businesses.
The closure of the acquisition of Twitter has shareholders of Tesla worried that Musk would be overburdened with all of his duties. It’s rumoured that the well-praised Tesla CEO doesn’t have enough time to manage both businesses effectively.
Musk bought Twitter to protect social media’s reputation, as many people now view these channels as potentially dangerous to society and only havens for negativity. Now that the deal is completed, it will be pretty intriguing to see what Musk has in store. Market players and Tesla supporters merely hope that Musk doesn’t stray too far from Tesla due to the deal.
Featured Image – Megapixl © Wellesenterprises
