X’s Revenue Collapse: Potential Impact on Tesla
Elon Musk is grappling with severe financial issues following his acquisition of X, formerly Twitter. The platform’s revenue has plummeted by 84% since Musk took over, raising fears that he might need to liquidate more Tesla Inc. (NASDAQ:TSLA) stock to address the financial gap. This potential move has Tesla investors worried, as it could further depress Tesla’s stock value, affecting all shareholders.
X’s Revenue Crisis
Musk’s $44 billion purchase of Twitter has faced significant challenges, as the platform’s revenue has dropped dramatically. According to documents obtained by The New York Times, X generated only $114 million in U.S. revenue during Q2 2024, a stark decline from $661 million in the same quarter of 2022. This represents an 84% decrease when adjusted for inflation. The revenue drop is primarily due to a mass exodus of advertisers, driven by Musk’s controversial actions and statements. Compounding the issue, X has initiated lawsuits against some of these advertisers, potentially deterring further business.
Bradford Ferguson, president and chief investment officer at Halter Ferguson Financial, remarked that suing advertisers could further challenge revenue recovery. The dire financial situation of X might necessitate significant financial intervention to stabilize the company.
Potential Tesla Stock Sales and Investor Anxiety
To address the financial strain at X, Musk may need to sell additional Tesla shares, causing anxiety among Tesla investors. Past sales of Tesla stock by Musk, totaling approximately $40 billion, led to notable declines in the stock’s value. According to equity analyst Matt Smith, Musk might need to offload between $1 and $2 billion worth of Tesla stock, which could lead to a 5% to 10% drop in Tesla’s share price.
Breaking Promises on Tesla Stock Sales
Musk had previously committed not to sell more Tesla shares until 2025. However, with X’s financial situation deteriorating, he might be forced to revisit this promise sooner. Musk had hinted in December 2022 that further stock sales could be necessary if conditions worsened. Notably, he had previously pledged in April 2022 that no additional Tesla stock sales were planned, only to sell billions of dollars worth of shares shortly after.
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