Tesla (TSLA) shares surged higher Friday as investors reacted with apparent relief that their iconic CEO may be prepared to abandon his $44 billion pursuit of Twitter and focus on the carmaker's myriad challenges heading into the second half of the year.
Elon Musk, who has pledged as much as $62.5 billion in Tesla shares in order to secure various levels of financing for his 'best and final' offer of $54.20 for the micro-blogging website, said Friday that questions linked to the group's accounting of spam accounts has put the deal "on hold", although he says he's still committed to the purchase.
Tesla shares have fallen around 33.5% since Musk made his 9.1% stake in Twitter public on April 4 as investors have counted the cost of both Musk's margin loans, his sale of around $9 billion in Tesla shares and the billionaire's growing leadership portfolio, which includes space exploration group SpaceX, The Boring Company construction company and neurotechnology specialists Neuralink Corp.
Tesla, which as seen its market value fall more than $450 billion so far this year, is also driving into headwinds powered by surging input costs, a global shortage in semiconductors, supply chain disruption that are limiting parts availability and China's ongoing 'zero Covid' crackdown that has shuttered production at its key Shanghai factory.
Data last week from the China Passenger Car Association (CPAC) showed Tesla produced just 10,757 cars in the world's biggest market last month, selling just over 1,500 and exporting none, thanks to a 22-day closure of its Shanghai facility during the city's Covid lockdown.
The April tally is the lowest in 2 years and compares to a sale total of 65,814 in the month of March. Overall car sales in China fell 35.7% from last year in April, the CPCA said, the biggest single-month decline since the pandemic trough of March 2020.
"The Musk/Twitter saga is a warning sign for Tesla shareholders. Not only is the stock's valuation completely disconnected from fundamentals, it's obvious that Musk is distracted right now," said David Trainer, CEO of Nashville-based investment research group New Constructs. "Trying to acquire Twitter when Tesla’s competition is more fierce than ever is unquestionably concerning even to ardent Musk fans."
"It's possible that Musk will revisit the Twitter acquisition at a lower price, but trying to predict how any of this will play out is impossible," he added. "Tesla is an overvalued stock and should be avoided and Twitter's stock has arguably no upside catalysts and it should be avoided, as well."
Tesla shares were marked 4.7% higher in early Friday trading to change hands at $762.00 each, a move that would still leave the stock with a year-to-date decline of around 36%.
The clean-energy carmaker is also looking at a multi-million impairment charge linked to its $1.5 billion investment in bitcoin, which it purchased last year under the direction of Musk and his view that the cryptocurrency is "really on the verge of getting broad acceptance" by both mainstream investors and the broader business community.
Estimates of Tesla's bitcoin carrying costs vary, but the timing of the purchase suggests a level of around $32,600. That value, of course, surged in the latter half of 2021, when bitcoin hit an all-time high of around $67,000, but now looks far more fragile after briefly crashing below the $25 level earlier this week.
"Digital assets are considered indefinite-lived intangible assets under applicable accounting rules," Tesla cautioned investors in a Securities and Exchange Commission filing tied to its first quarter earnings last month. "Accordingly, any decrease in their fair values below our carrying values for such assets at any time subsequent to their acquisition will require us to recognize impairment charges, whereas we may make no upward revisions for any market price increases until a sale."
Bitcoin prices were last seen trading 6.5% higher on the session at $30,834.60 each, a move that leaves the world's biggest cryptocurrency down 32.3% for the quarter.
