What Elon Musk buying Twitter means for Tesla: Columbia Law professor

Tesla (TSLA) shares fell on Tuesday amid investor concerns that CEO Elon Musk would need to sell shares in order to fund a portion of his $44 billion buyout of Twitter (TWTR). Meanwhile, Twitter’s shares have recovered from a late-March trough ahead of the buyout deal.

Columbia Law School Professor John Coffee believes that it will be challenging for Musk to juggle managing Tesla and Twitter simultaneously — on top of SpaceX, The Boring Company, and Neuralink.

“Moreover, Tesla is going to need constant management, and so is Twitter,” Coffee told Yahoo Finance Live. “Musk wants to change everything in Twitter involving how it presents information, how it gets its revenues, how it staffs things. All that's going to take constant attention, and so is Tesla, which is fairly thin when managing debt.”

Coffee joined Yahoo Finance Live to break down what the Elon Musk Twitter takeover means for investors. Musk has secured $25.5 billion of fully committed debt and margin loan financing and is providing around $21 billion of equity commitment. Twitter shareholders are expected to receive $54.20 per share, and once the deal is complete, the company will be taken private. The deal is anticipated to close around September to October.

Although Musk’s plans for Twitter are still uncertain, he stated in a press release that he intends to bring some overhauling changes to the user experience and culture of the social media platform. He expressed interest in adding new features, making algorithms open source to increase trust, combating spam bot activity, and authenticating users.

“All of that's going to require elaborate disclosure and may produce some controversies, but I don't think there's a [regulatory] deal breaker in all that,” Coffee said.

At this point, Coffee does not anticipate significant regulatory hurdles on the path towards closing for the buyout deal. He attributed this to the nature of Tesla’s business and its positioning in relation to social media.

“There's no real antitrust problem here. There would be for anyone else,” he added. “Disney (DIS) would love to own Twitter, but it can't because they're both close enough to social media, whereas Tesla is basically an electric car company that produces no antitrust problems.”

Risks facing Tesla

Meanwhile, Tesla has been contending with supply chain constraints despite the recent openings of Gigafactories in Berlin and Texas. In addition, the EV company’s C-suite may be lacking manpower — the company currently lists just Musk, CFO Zachary Kirkhorn, and Drew Baglino, who effectively acts as CTO, on its executive leadership team. Regardless of headwinds, Tesla was able to nearly double its revenue in Q1 2022.

“And over on the Tesla side, I think there's going to be nervousness that Elon Musk is, in some way, something like a child,” Coffee said. “When you give a child a new toy, it ignores and throws away all its old toys. Will he still be able to give the careful attention that Tesla needs? Because it's got a thin management staff.”

Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter @thomashumTV

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