Billionaire Elon Musk is facing yet another challenge at Twitter. The fate of the $3 billion worth of unsecured loan taken to buy out the social media platform presents Musk with a new obstacle. At the same time, shares of Musk’s electric vehicle (EV) company Tesla (NASDAQ:TSLA) continue to suffer as a result of Musk’s increased focus on newly acquired Twitter.
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As per Bloomberg, banks that financed the loan, including Morgan Stanley (NYSE:MS) are reportedly considering switching the unsecured debt for margin loans backed by Musk-owned Tesla shares. This would simply mean the loan would stop hanging over Twitter’s head and shift to Musk’s private balance sheet.
The swap would reduce Twitter’s annual interest expenses, which amount to $1.2 billion, giving the ailing company room to breathe. Meanwhile, these discussions remain secret, and no clarity is achieved on the terms and conditions of the new loan.
Surprisingly, while these talks are doing the rounds, Musk himself has stated that taking up margin loans during uncertain macroeconomic situations is a very risky proposition. Thankfully, the Tesla CEO does acknowledge the overhang on Tesla stock associated with the margin loans.
“When there are macroeconomic risks, it is generally wise to avoid using margin loans on any company, as stocks may move in ways that are decoupled from their long-term potential,” Musk replied to a question on Twitter.
Having claimed that he has overpaid for the microblogging site, Musk and his team are under immense pressure to turn around Twitter and strengthen its financial position. On the other hand, the Twitter overhang continues to pressurize TSLA stock. Year to date, the stock has lost 56.6%.
Is Tesla Stock a Buy, Sell, or Hold?
On TipRanks, Tesla stock has a Moderate Buy consensus rating. This is based on 18 Buys, eight Holds, and two Sell ratings. Also, the average Tesla price target of $303.72 implies 75.1% upside potential to current levels. TSLA stock is currently trading at a nearly 57% discount to its all-time high of $402.67 marked on January 4, 2022.
