Tesla's market capitalization lost $126 billion in a single session on April 26 as the stock dropped more than 12% to $876.42 after Elon Musk's bid to buy Twitter was accepted.
The significant drop can be explained by investors' concern that Musk may sell Tesla shares to complete his $44 billion takeover of the popular social platform.
Before yesterday's session, Tesla's market cap was already down $250 billion since April 4, the day Elon Musk announced he increased his Twitter stake. In total, Tesla stock lost roughly 23% since then.
As Bloomberg points out, the value of Musk's 17% stake in Tesla has shrunk by more than $40 billion since April 4, almost double the equity portion he pledged in the Twitter transaction.
Adding insult to injury is the fact that Musk has provided little information on how he will cover the $21 billion equity piece that he personally guaranteed. Furthermore, the fact that Musk is using Tesla shares as collateral in the Twitter transaction has made investors worried that he may sell some of his stake to fund the acquisition of Twitter.
As part of the Twitter deal, Musk took out a $12.5 billion margin loan tied to his Tesla stock; prior to that, he had already borrowed against about half of his Tesla shares.
To be fair, Elon Musk's acquisition of Twitter is not the only factor that has led to a significant drop in Tesla's stock price. The slower economic expansion and persistent inflation have generated a broader selloff in equity markets around the world. In addition, investors have fled high-growth companies as the Federal Reserve prepares to apply significant rate hikes.
Still, this massive drop comes just after Tesla reported record quarterly results last week; prior to April 26, the company's shares were the best performers among the high-profile growth stocks this year. Analysts believe the risks to Tesla's stock price remain as the uncertainty surrounding the shares continues.
Interestingly, Twitter stock also slid on April 26, falling 3.9% to close at $49.68, even though Musk agreed to buy the company the day before for $54.20 per share in cash. According to Reuters, this may reflect investor concern that the abrupt decline in Tesla's shares could lead to Elon Musk having second thoughts about the Twitter deal.