Tesla shares plunge 12% as investors wary of Elon Musk's Twitter plan

The value of Tesla fell by more than $100 billion US on Tuesday as investors digested news that the company's CEO may have to sell part of his stake in the company to buy Twitter and will likely be distracted from his day job while he does.

Shares in the electric car maker lost 12 per cent of their value to close at $876.42 on the Nasdaq on Tuesday, down by more than $120 US from Monday's leveland the worst one-day showing for the company since January.

While Tesla shares have been on a tear along with Elon Musk and his rising fame in recent years, they'velost almost a quarter of their value since their CEO's dalliance with Twitter first came to light earlier this month.

Musk owns more than 173 million shares in Tesla, aboutone-sixth of the electric car maker companywhich has a market value of just shy of$1 trillion US after Tuesday's fall. His Tesla stake is valued at more than $150 billion US,a big part of what makes Musk the richest person in the world, but he has used about $60 billion worth of his Tesla shares as collateral for loans.

Since Musk's minority stake in Twitter was revealed earlier this month, the dollar value of Musk's stake in Tesla has declined by more than what he has offered to pay for the social media company.

In his $44-billion US offer for Twitter, he pledged to come up with $21 billion in cashbut so far hasn't indicated where he'll get the money. Tuesday's sell-off was fuelled by the realization that Musk may have to sell or borrow against even more Tesla sharesto fund his Twitter takeover.

Technology analyst Daniel IvesofWedbush Securities said the Twitter saga "has put a black cloud over Tesla's stock in the near-term as the Twitter financing component for Musk is now front and centre."

"As we have said before, the Twitter transaction was never ideal for Tesla investors as the stock will now ultimately bear the burden of acquiring Twitter," Ives said in a note to clients.

WATCH | Here's what politicians are saying about Musk's move to buyTwitter:

Federal MPs react to Elon Musk's deal to buy Twitter

2 years ago

Duration 1:15

Liberal MP Nathaniel Erskine-Smith and Conservative MP Garnett Genuis discuss the impact they think Elon Musk might have on Twitter as its new owner.

Even if Muskhas other ways of finding the money, buying Twitter will cost him time and attention and that could come at the cost of Tesla.

Given how vocal he has been on the subject, it's believed Musk will likely take an active role at the company once it is private, which will draw his time and effort away from the electric car maker.

In addition to Tesla, Musk is also the CEO of space exploration firm SpaceXand underground transportation firm The Boring Company.

"Teslashareholders can't be happy that Musk will have to divert even more attention away from winning the [electric vehicle]race," said Edward Moya, a senior market analystwith foreign exchange firm Oanda.

At least one analyst thinks it can work, however.

"Elon Musk is an incredible CEO [and] anincredible manager and one of the key parts of investing in stocks ... is you got to buy into the manager," Philip Palumbo, chief investment officer of Palumbo Wealth Management, said on Monday.

"There's nobody better out there, in my view, than Elon Musk, and that's always been the case, [but]the question is can you really juggle three businesses?"