Elon Musk’s quest to acquire Twitter (NYSE:TWTR) has come full circle. The Tesla (NASDAQ:TSLA) CEO has announced that he wants to purchase the social media platform at $54 per share, the original terms he proposed months ago. Like clockwork, TSLA stock has plunged as markets react negatively to the news that sunk it only a few months ago.
TWTR stock shot up yesterday on the news, and while it has since come down, it appears to be rising again. But TSLA began falling as soon as markets opened and definitely isn’t hinting at a rebound. As of this writing, it is down more than 6% for the day. If Musk’s Twitter deal continues to progress, TSLA stock will be pushed further down.
Does this sound familiar? It should. Investors saw this exact scenario play out in May 2022 after Musk made his first play to acquire Twitter. It’s impossible to ignore the fact his quest to acquire the social media giant is a zero-sum game.
When Musk attempted to terminate his agreement with Twitter, shares were quick to fall while TSLA stock rose. Yesterday, upon news he was once again planning to purchase it, they jumped more than 20% while Tesla shares dipped. Today, the latter are still on a downward trajectory as momentum for the Twitter deal picks up.
Let’s take a closer look at what’s at stake for both companies.
TSLA Stock and the Twitter Deal: Round Two
Understanding why TSLA stock falls every time Musk takes a step toward buying Twitter is simple. Investors aren’t confident in Musk’s ability to effectively run two companies in completely different sectors. Musk has made it clear that he is already spread very thin between his responsibilities at SpaceX, Neuralink and The Boring Company. Adding another large scale company doesn’t seem like a logical step forward. As InvestorPlace reported in July:
“It’s no secret that Tesla shareholders weren’t happy when Musk announced his plans to acquire Twitter. There were multiple reasons why TSLA stock didn’t react well to the news. The X Holding Company that Musk planned on launching sounded like exactly the type of conglomerate that Wall Street doesn’t like. But more importantly, Musk taking over a different company in a different sector stood to compromise his leadership of Tesla.
Multiple experts have agreed that Musk purchasing Twitter would not be good for TSLA stock or the company in general. John Engle, president of Almington Capital spoke to InvestorPlace about how the prospect could be particularly daunting for Tesla shareholders. “This fear is not unwarranted, since Tesla has increasingly become a party of one,” he noted. “Musk is in many ways the only visible personality at Tesla engaged in the technological and innovation-focused aspects of the business.”
While Musk is unquestionably the face of Tesla, that statement is even more true now. In July 2022, Tesla’s autopilot division leader Andrej Karpathy unexpectedly departed, leaving investors with questions. Now that Musk is once again maneuvering to purchase Twitter, they likely have even more. But for anyone wondering if the acquisition still harm TSLA stock, the answer is a definite yes.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.