Spooked investors wipe $A56 billion from Elon Musk’s Tesla fortune

The world’s richest person secured victory with his takeover bid of Twitter, but he has been hammered on the share market.

Elon Musk’s move to takeover Twitter spelled bad news for his electric car company Tesla, with its shares plunging 12.2 per cent overnight which also wiped $US40 billion ($A56 billion) from the world’s richest person’s fortune.

Tesla’s dramatic drop was one of the worst performing stocks on the US market with roughly $US126 billion ($A177 billion) dropped from the car manufacturer’s value, with investors spooked he may sell his shares to fund the $US44 billion ($A61.4 billion) purchase of the social media giant.

Musk currently has a 17 per cent stake in Tesla and the $US40 billion ($A56 billion) hit he took to his fortunes is almost double the equity portion he pledged as part of the Twitter transaction.

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Billionaire Elon Musk is capturing a social media prize with his deal to buy Twitter, which has become a global stage for companies, activists, celebrities, politicians and more. Picture: Olivier Douliery/AFP

Stocks like Tesla were previously prized by investors, but have taken a battering in recent weeks due to concerns about rising interest rates impacting future earnings.

The company’s value has slid by an enormous $US275 billion ($A385 billion) since the start of April when Musk revealed he wanted to buy Twitter.

Investors could be particularly concerned there is little detail on how he plans to fund the $US21 billion ($A29 billion) he has personally guaranteed as part of the sale.

Musk claims he was the only person capable of unlocking the full potential of the platform. Picture: Olivier Douliery/AFP

Musk is using Tesla shares as collateral for the transaction prompting fears he could sell off some of his stake, with some experts deeming this a huge risk if shares were to continue to plunge unexpectedly.

Arthur Hogan, chief market strategist at US investment firm National Securities Corp, said Tesla has three strikes against it.

“Apart from the worries about a share sale and a wider sell-off in growth stocks, Tesla shares are also reflecting some concern that Elon Musk could be spreading himself and/or his bench too thin taking on this new challenge,” he told Bloomberg.

Musk won his bid to takeover Twitter. Picture: Ryan Lash/TED Conferences, LLC/AFP

But Ben Laidler, global markets strategist at investment network eToro, said social media companies were also experiencing “tough” times.

“Such a quick capitulation by the Twitter board for a $US54 per share bid, 30 per cent below the stock’s price high of last year, likely reflects the tough outlook for the social media sector and the only gradual turnaround impact of Twitter CEO Parag Agrawal,” he said.

But the successful Twitter bid could raise concerns for Tesla shareholders, as Musk becomes “involved in yet another time-consuming venture and potentially selling down” part of his stake.

There has also been heavy criticism of Musk’s move with fears basic protections put in place will be ditched.

The Twitter profile of Elon Musk with more than 80 million followers. Picture: Scott Olson/Getty Images

Angelo Carusone, president of Media Matters for America, a non-profit media watchdog, claimed Elon Musk will unwind a whole range of very basic protections against harassment, abuse and disinformation that Twitter had spent years putting into practice.

He said it would effectively open “the floodgates of hate and lies and using Twitter’s position as a market leader to pressure other social media companies to backslide”.

He added people shouldn’t be fooled by Musk’s claim about freedom of speech.

“With this sale, you can fully expect Donald Trump’s account to be restored along with a whole host of other accounts that engaged in abuse, harassment, and repeated violations of Twitter’s rules. The race to the bottom begins,” he said.

“But all hope is not lost. Accountability now rests with Twitter’s top advertisers, who need to make it clear that if Twitter becomes a free-for-all of hate, extremism and disinformation – they will walk.”

Originally published as Spooked investors wipe $A56 billion from Elon Musk’s Tesla fortune