Tesla's Stock Drop: Musk's TikTok Deal Weighs Heavy

Tesla (TSLA) shares dropped 3.6% on Thursday, underperforming the Nasdaq's 0.9% decline, as investors weighed the potential implications of CEO Elon Musk's rumored $40-50 billion TikTok acquisition. The speculation comes as TikTok faces an impending ban in the U.S. on Sunday, January 19. While some analysts, like Wedbush's Dan Ives, see strategic benefits in Musk's potential acquisition, investor Gary Black expressed concerns about the impact on Tesla's stock.



Black, managing partner of The Future Fund LLC, took to X to voice his concerns about Musk's potential TikTok acquisition. He warned that Musk might need to sell billions in Tesla shares to fund the deal, which could negatively impact Tesla's stock. Black drew parallels to Tesla's stock pressure following Musk's Twitter purchase, which led to a 67% drop from April to December 2022. He also noted that Tesla's stock previously experienced a 70% drawdown between April 2022 and January 2023, partially attributed to Musk's Twitter acquisition and Tesla's subsequent EV price cuts.



Black's concerns are supported by historical data, as Tesla's stock has been sensitive to Musk's non-core investments and the market's reaction to them. While Musk's relationships with both the incoming Trump administration and Beijing could potentially facilitate a TikTok deal, TikTok has dismissed the acquisition rumors as "pure fiction," leaving the outcome uncertain.



The strategic implications of Musk's diversification into social media for Tesla's core business are significant. While there are potential synergies, such as promoting Tesla's products and gathering market insights, there are also risks, including stock price impact, investor sentiment, resource allocation, regulatory scrutiny, and potential delays in Tesla's core EV business. As Tesla approaches milestones like achieving generalized unsupervised autonomy, investors will be watching closely to see if Musk prioritizes Tesla's technological advancements over a potential TikTok acquisition.

In conclusion, the potential impact of Elon Musk's TikTok acquisition on Tesla's stock performance and valuation is a topic of concern for investors. As the deadline for TikTok's U.S. ban approaches, investors will continue to weigh the strategic implications of Musk's diversification into social media for Tesla's core business. The outcome of this situation will be crucial in shaping Tesla's future and the broader tech market.