Elon Musk Needed To Sell Tesla Shares To 'Save Twitter,' Analyst Concurs After Doing The Math

Tesla Inc. TSLA CEO Elon Musk recently came under criticism for selling the electric vehicle maker’s stock to fund Twitter. A Tesla bull seems to think the proceeds from the sale would be a lifeline for the platform, helping to keep its operations going in the near- to medium-term.

What Happened: Musk’s statement that he sold Tesla stock to save Twitter isn’t far from truth, Tesla bull and Future Fund founder Gary Black said. The analyst estimated that Twitter currently has a $3.4 billion per year deficit to fill.

Before Musk stepped in, the fund manager said, Twitter’s advertising revenue was on track to reach $4.4 billion in 2022 and subscription revenue was $0.4 billion annually. This is as opposed to Twitter’s costs and operating expenditure of $5.6 billion per year, he added.

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In the post-Elon era, cost cuts could reduce costs and operating expenditures to $4 billion annually and the interest expense on the $13 billion new debt that was availed to fund the deal will likely work out to $1.2 billion per year.

Given the pullback by some advertisers amid Musk’s comments on House Speaker Nancy Pelosi’s (D-Calif) husband Paul’s attack, threats to “name and shame” advertisers, his pro-Republican stance and the blue checkmark fiasco, Black expects ad revenue to drop to $1 billion. He estimates subscription fees to increase to $0.8 billion, resulting in total revenue of $1.8 billion.

Weighing revenue against outgo, Twitter will likely report an operating loss of $3.4 billion in 2023, the analyst said.

“Elon’s $4B $TSLA sales could fund $TWTR until end of 2023,” he added.

Why It’s Important: Tesla shares have been under pressure amid Musk’s Twitter buy, primarily due to fears that the billionaire may have to offload more of his shares in the company. Increased supply will have a depressing effect on the stock price.

If Musk can help Twitter navigate through the transition period without any further hiccups and additional stock sales, it could prove positive for Tesla stock.

Tesla shares closed Friday’s session 2.75% higher at $195.97, according to Benzinga Pro data.

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