Elon Musk‘s financial troubles at X, formerly Twitter, have escalated to the point where Tesla investors are fearing a fresh stock sell-off, according to Fortune. With X’s revenue collapsing and advertisers abandoning the platform, Tesla shareholders worry Musk may be forced to sell more of his Tesla shares to finance his $44 billion acquisition.
The financial strain on X is evident. Internal figures obtained by The New York Times show that the social media platform’s U.S. revenue in the second quarter dropped 25% from the previous quarter and 53% year-over-year. These figures are worrying, but the decline is even more severe when compared to pre-acquisition numbers. In the second quarter of 2022, X generated $661 million in revenue, and once inflation is accounted for, revenue has collapsed by 84%.
Bradford Ferguson, president and chief investment officer of Halter Ferguson Financial, said Musk could be looking to sell between $1 billion and $2 billion in Tesla stock to plug X’s financial holes. “It’s a massive hole they need to plug,” Ferguson stated. He further speculated that this move could cause Tesla’s stock to lose between 5% and 10% of its value.
Musk has not publicly addressed the recent concerns about X’s finances, and Fortune was unable to reach him for comment. However, Musk’s previous actions may hint at what’s to come. He initially financed his acquisition of Twitter by selling large chunks of Tesla stock, which led to Tesla’s shares hitting two-year lows.
In December 2022, Musk made a promise during a Twitter Spaces discussion that he would not sell Tesla stock until at least 2025. “Definitely not next year under any circumstances. Probably not the year after either,” he reassured Tesla investors at the time. Despite this pledge, experts now believe that Musk’s optimism in 2022 may have been misplaced, with Ferguson adding, “He was probably a little more optimistic in December 2022 and didn’t anticipate it would get worse.”
Gary Black, managing partner of the Future Fund, echoed these concerns, warning that X is still bleeding money and that Musk may have no choice but to sell more Tesla shares. “The bleeding of X will continue, and at some point, Elon will have to sell more Tesla shares to plug the $1–2 billion per year hole at X,” Black said.
One major issue facing X is its obligation to service the $13 billion in debt taken on as part of Musk’s leveraged buyout of the company. This debt comes with loan covenants that may require X to maintain certain financial metrics. If X fails to meet these obligations, it could face higher interest rates or even demands for immediate repayment, further worsening its financial situation.
For Tesla shareholders, the prospect of another large stock sale is concerning. Tesla’s stock has been volatile in recent years, and additional sales by Musk could push the stock down further. Investors are already bracing for a potential sell-off as X’s financial troubles deepen, and with the 2025 deadline approaching, many are questioning whether Musk can keep his promise not to sell any more Tesla shares.
As X’s financial woes continue to mount, the eyes of Tesla investors remain fixed on Musk’s next move, knowing that his actions at X could have significant consequences for their own investments.
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