2022 is one of Tesla’s (TSLA) worst years on record for the stock. Its CEO, Elon Musk, overpaid for Twitter. Upon restructuring its policies and staff, Musk quickly introduced subscriptions that will create cash flow for the microblogging site.
Tesla shareholders did not overlook Musk’s attention to Twitter. The stock is in trouble this year. It is down by 57% YTD. Its price-to-earnings ratio of 46 times and its over 700% return since around 2019 might hurt the stock.
On Dec. 16, TSLA stock closed below the 50-day simple moving average of $155. At $150, bears who closed their bet against the firm long ago might revisit the short-selling bet.
Musk financed Twitter’s acquisition with debt. The bonds pay over 11% in interest. Twitter needs annual cash flow to exceed interest costs. Since some advertisers are using Musk’s buyout as an excuse to pause spending, Twitter’s revenue will shrink.
Bankers backing the deal might demand higher collaterals. Backed by Tesla stock, selling pressure could intensify. Musk already sold $4 billion worth of shares last week.
Your Takeaway
Insider sales led by Tesla’s CEO could create a panic in its shares. Investors, battered by losses in 2022, might sell to solidify whatever gains remain with Tesla stock.
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