Tesla Inc. (TSLA) investor Gary Black has voiced significant concerns over Elon Musk’s potential acquisition of TikTok’s U.S. operations, cautioning that such a move could adversely affect Tesla’s stock price. Black’s argument hinges on the financial mechanics of the deal, suggesting that Musk would need to liquidate billions in Tesla shares to finance an acquisition estimated to be worth between $40 to $50 billion. This scenario echoes the aftermath of Musk’s Twitter acquisition, where Tesla’s stock experienced a 67% drop from April to December 2022, exacerbated by the company’s concurrent price reductions on its electric vehicles, which further depressed earnings forecasts.
The urgency surrounding this potential acquisition stems from an impending deadline; if ByteDance, TikTok’s Chinese parent company, does not divest the app’s U.S. operations by January 19, TikTok faces a ban in the United States. This situation has led to speculation about Musk stepping in as a buyer, given his track record with high-profile tech acquisitions. However, Black’s warning underscores the potential for a repeat of the market’s reaction to Musk’s Twitter deal, where investors might again shy away from Tesla stock, fearing another significant devaluation.
On the other hand, Wedbush analyst Dan Ives sees the situation differently, suggesting that Musk’s established relationships with both the incoming Trump administration and Beijing could smooth the path for this acquisition. Ives points out that Musk’s close ties with Trump, especially in light of Trump’s interest in finding alternatives if the Supreme Court upholds the TikTok ban, might make such a deal more feasible. This perspective contrasts starkly with Black’s, highlighting the complex interplay of politics, business, and market sentiment that could influence the outcome.
TikTok, however, has pushed back against these speculations, dismissing Bloomberg’s report on a potential Musk acquisition as “pure fiction.” This statement from TikTok underscores the speculative nature of the current discourse and the company’s reluctance to engage with what it deems as unsubstantiated rumors.
The debate over Musk’s potential foray into TikTok ownership is not just about the financial implications for Tesla – last trading at $417.77 p/sh – but also touches on broader issues of national security, data privacy, and the geopolitical tensions between the U.S. and China. If Musk were to proceed with this acquisition, it would not only expand his influence in the social media landscape but also potentially reshape how U.S. regulators view foreign-owned tech entities in the context of national security.
The scenario leaves investors and market observers in a state of anticipation, weighing the potential benefits of Musk’s diversified tech empire against the historical precedents of stock devaluation following his major business moves. As the deadline approaches, all eyes will be on the Supreme Court’s decision, the actions of ByteDance, and Musk’s next move, with significant implications for Tesla’s stock and the broader tech market.
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