The impending stock split and accompanying retail euphoria around Tesla stock allow Elon Musk to appear more sympathetic toward Twitter
Tesla shares are up nearly 50 percent from their year-to-date stock low (closing price) of $628.16, with the stock now down just about 22 percent so far this year. This dramatic shift in Tesla's fortunes stabilized Elon Musk's finances, allowing the super-billionaire to take a more conciliatory stance toward Twitter in the ongoing saga.
As most of our readers know by now, Tesla stock took a big hit between April and May of this year as the specter of Musk's escalating escalation of his huge stake in Tesla loomed large over the collective psyche of investors. This liquidation was necessary to fund Elon Musk's $44 billion deal to make Twitter private. However, with Tesla's stock price dropping, Elon Musk will likely start thinking about his risky Twitter-related maneuver.
Of course, Elon Musk eventually ended up walking away from the Twitter acquisition deal, citing the proliferation of bots on the platform as a major obstacle to completing this deal. For its part, Twitter maintains that the Tesla CEO has no legal standing to walk away from the deal, especially since Musk has waived due diligence in the lead up to the conclusion of the takeover agreement. Both parties are now heading toward a legal showdown in October.
We think Hindenburg Research gave Elon Musk the original inspiration to walk away from the deal. At the time, Musk was basically trapped, as Tesla's stock price had fallen dramatically since his Twitter ambitions were announced. Enter the famous short seller, who published a less-than-excellent view of the takeover in which he argued that the deal was likely to be repriced lower given "nosebleed" leverage, an inflated bid price, and "undue pressure" on Tesla's stock.
Crucially, Musk responded to Hindenburg's bearish research thesis with a brief comment, describing the short seller's notes as "interesting." Shortly thereafter, Elon Musk began raising the issue of bots on Twitter, essentially looking for a way out.
This brings us to the crux of the matter. As mentioned earlier, Tesla's fortunes have seen a sharp turnaround lately, with the stock seeing a sharp rally in the past few weeks, stabilizing Elon Musk's net worth in the process. According to Vanda Research findings, this rally was largely driven by retail investors. Research House recently noted:
“Retail investor purchases have consistently exceeded the year-to-date average of $1.36 billion over the past five days, focusing on “classic” tech stocks such as Tesla, Nvidia, Apple, AMD and Amazon, according to research firm Vanda. On July 29, it was The figure is $1.64 billion, the highest in a day of positive performance for the S&P 500 since the sell-off began in 2022.”
With retail investors already at the forefront of this ongoing rally, Tesla just added a major boost to this bullish trend by announcing a series of positive developments at last night's shareholder meeting. For cleverness, shareholders have now approved a 3-for-1 stock split. Keep in mind that Tesla cumulatively gained more than 1,700 percent when it last announced the stock split. Thus, the last step is interpreted as another attempt to offset the stock gains. Furthermore, Elon Musk confirmed that Tesla has an available supply of 1.5 million battery units and that the company aims to reach an operating rate of 2 million units per year by the end of the year. Additionally, Cybertruck is expected to enter mass production by mid-2023, and by 2030, Tesla aims to produce 20 million vehicles annually. Finally, Musk also hinted at a future share buyback program. Collectively, all of these announcements are expected to fuel the continued rally in Tesla's stock.