Elon Musk Loses $25 Billion After Tesla Stocks Plunge: Here's What Caused Massive Drop

Tesla stocks plummeted after its CEO Elon Musk presented a $44 billion bid for the social media giant Twitter. Investors are still reviewing the implications of the bid.

Tesla stocks fell by 12 percent on Tuesday to $876, pushing the shares down more than 28 percent from their peak in November.

It removes $25 billion from Musk's fortune and $128 billion from Tesla's market capitalization, now at $906 billion, according to a Forbes report.

Oanda analyst Edward Moya noted that Tesla shareholders cannot be happy that Musk will have to redirect his attention from the electric-vehicle industry.

Wells Fargo analyst Colin Langan warned Tesla shareholders that the risk of Musk selling even more shares could put pressure on the stock. Langan added that Musk's involvement with Twitter could be a distraction for Musk "who already has a full plate," citing recently opened factories in Berlin and Austin.

Much of Musk's wealth is tied up in Tesla stock, meaning he would likely have to borrow against his holdings to fund the Twitter bid.

Elon Musk Buys Twitter

Musk has reached a deal on Monday to buy Twitter for around $44 billion, which marks a victory by the world's richest man to take over the social media platform used by world leaders, celebrities, and cultural trendsetters.

Twitter has agreed to sell itself to Musk for $54.20 a share, a 38 percent premium over the company's share price this month before he revealed he was the firm's single largest shareholder, according to a New York Times report.

Musk said in a statement announcing the deal that free speech is the core of a functioning democracy, adding that Twitter is the "digital town square" where important matters to the "future of humanity" are discussed.

The deal is expected to close this year. It has been unanimously approved by Twitter's board.

Musk buying the social media company quickly raised questions about what he will do with the platform and how his actions will have an impact on "online speech" around the world.

Twitter Valuation

Twitter stock closed at $49.68 on Tuesday, which is about eight percent below the $54.20 price at which Musk has agreed to take the company private.

The deal would be one of the largest leveraged buyouts on records, according to a Financial Times report.

The EU on Tuesday warned that Musk must follow the bloc's rules on moderating harmful content.

Musk has previously criticized Twitter and has connected his acquisition of the social media platform to free speech.

Australian lobby group Digital Rights Watch raised concerns that while Musk claims the takeover is about free speech, the buyout is "actually about power," according to The Guardian report.

Chair Lizzie O'Shea said that they have to account for asymmetries of power and other barriers that stop people from speaking freely.

She added that what the Tesla CEO really seems to want is "freedom from accountability."

This article is owned by Latin Post.

Written by Mary Webber

WATCH: Tesla Shares Down 21% Since Musk's Twitter Stake - from Bloomberg Technology