Financial troubles at Elon Musk’s social media platform X, formerly known as Twitter, could have (more) ripple effects for Tesla (Nasdaq: TSLA) shareholders. As X grapples with plummeting advertising revenue, experts speculate that Musk may need to sell Tesla stock to keep the struggling platform afloat.
Recent internal figures obtained by the New York Times reveal a stark decline in X’s revenue. In the second quarter, the platform’s US revenue dropped 53% year-over-year and 25% from the previous quarter. Compared to pre-acquisition figures from Q2 2022, revenue has plummeted by an alarming 84% when adjusted for inflation.
The financial crisis at X stems largely from the advertiser exodus following Musk’s controversial statements and management decisions. His recent move to sue advertisers for boycotting the platform further exacerbates the situation.
Bradford Ferguson, president of Halter Ferguson Financial, estimates that X may require a cash infusion of $1 to $2 billion. This could potentially lead to a 5-10% drop in Tesla’s stock value if Musk decides to sell shares to raise funds.
While Musk is reportedly worth over $241 billion, most of his wealth is tied up in illiquid assets across various companies. Tesla, being publicly traded, presents the most accessible option for quick cash.
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In December 2022, Musk pledged not to sell Tesla stock until at least 2025 to fund X. However, as that deadline approaches and X’s financial woes intensify, some analysts believe he may be forced to renege on that promise. (Also, what do Musk’s pledges really amount to?)
Gary Black, managing partner at Future Fund, concurs with Ferguson’s assessment, saying that the “bleeding at X will continue and at some point Elon will have to sell more $TSLA shares to plug the $1-$2B/year hole at X.”
The potential stock sale could also be warranted by the need to meet loan covenants for the $13 billion in leveraged buyout debt assumed during the X acquisition.
Information for this story was found via Fortune, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
