Twitter’s (TWTR) board may vow that it will seal its deal with Elon Musk one way or another, but some analysts say that one thing is for sure — Tesla (TSLA) shareholders will likely be better off with the deal off the table.
On Friday, after Musk called off his pursuit of Twitter due to “material” breaches of the merger agreement, shares of Tesla popped higher in extended trading before today’s broader market sell off.
There are a couple reasons why this is good for Tesla shareholders, says CRFA analyst Garrett Nelson, including that it pulls CEO Elon Musk deeper into the Tesla — and away from distractions.
“We consider the Twitter deal meltdown a positive for TSLA, as one of the concerns that has weighed on the stock since the deal was announced was that Elon Musk was potentially biting off more than he can chew by adding Twitter to his portfolio of companies (Tesla, SpaceX, Neuralink, Boring),” Nelson told Yahoo Finance.
Wedbush’s Dan Ives also weighed in, suggesting in a note to investors this weekend that there could be a “relief rally as this situation was an overhang on the stock, but the Street is wary of the looming court battle ahead between Musk/Twitter Board.” Ives had previously stated this whole saga was a “black eye” for Musk.
Another overhang for Tesla stock was the sheer number of shares that were pledged by Elon Musk in order to raise the capital needed to buy Twitter. Musk had sold around $8 billion worth of Tesla stock to apparently pay tax bills related due to exercising options awards, and ostensibly to fund the Twitter purchase. If the Twitter deal is over, perhaps any future Tesla share sales by Musk to fund it are off the table too.
A noteworthy element in this saga is that Musk’s two major share sales were done near all-time highs for Tesla stock, before Musk’s warnings in recent weeks of an economic downturn.
And as Yahoo Finance’s Brian Sozzi wrote in today’s Morning Brief, rich, powerful people like Elon Musk tend to do whatever they please, because of money, connections, and “ruthless aggression.” And it turns out the rich and powerful also get forgiveness from finicky investors – if they have the track record to prove it.
Though Musk has a pretty deep portfolio of companies to keep his eye on, it hasn’t stopped him from leading Tesla to an over 1,000% return in the past five years.