Amidst Musk’s Twitter deal, why has Tesla lost $126 billion in valuation

New Delhi, Apr 27: Tesla Inc lost $126 billion in value on Tuesday due to investor concerns that its Chief Executive Elon Musk may have to sell shares to fund his $21 billion equity contribution to his $44 billion buyout of Twitter Inc, Reuters reported.

The shares of Tesla have been targeted by speculators although the company is not involved in the Twitter deal. The 12.2 per cent drop in Tesla's shares on Tuesday equated to a $21 billion drop in value of his Tesla stake.

On Tuesday the shares of Twitter too slid falling 3.9 per cent to close at $49.68 even though Musk had agreed to buy it on Monday for $54.20 per share in cash. The widening spread reflects the concerns of investors that the decline in Tesla's shares from which Musk derives the majority of his $239 billion fortune could lead him to having second thoughts about the Twitter deal.

Musk has reached an agreement to acquire Twitter for approximately $44 billion, the company said. The outspoken Tesla CEO, the world's wealthiest person, has said he wants to buy Twitter because he thinks it's not living up to its potential as a platform for "free speech." He says it needs to be transformed as a private company in order to build trust with users and do better at serving what he calls the "societal imperative" of free speech. Twitter said it will become a privately held company after the sale is closed.

"Twitter has a purpose and relevance that impacts the entire world," its CEO Parag Agrawal said in a tweet. "Deeply proud of our teams and inspired by the work that has never been more important," he added.

Musk describes himself as a "free-speech absolutist," although he hasn't been exactly clear what he means by that. In a recent TED interview, the billionaire said he'd like to see Twitter err on the side of allowing speech instead of moderating it. He said he'd be "very reluctant" to delete tweets and would generally be cautious about permanent bans. He also acknowledged that Twitter would have to abide by national laws governing speech in markets around the world.

Musk himself, though, regularly blocks social media users who have criticised him or his company and has used the platform to bully reporters who have written critical articles about him or his company.

Twitter's board at first enacted an anti-takeover measure known as a poison pill that could have made a takeover attempt prohibitively expensive. But when Musk outlined the financial commitments he had lined up to back his offer of $46.5 billion and no other bidders emerged the board opened negotiations with him.