Tesla (TSLA  ) stock dropped 12% following the news that CEO Elon Musk would be buying Twitter (TWTR  ) and taking the company private. Overall, shares are down about 25% since he unveiled his stake.

There were a couple of factors for the decline:

1. Investors are spooked that this could take away Musk's focus from Tesla especially as moderating social media websites is a lose/lose proposition. 'Free speech' on social media is an appealing ideal, but the reality is that there is a lot of grey area that requires value judgments. And, there are simply millions of items posted every second which means that policies and algorithms have to be created, and these will always make mistakes. Or, the company has to hire humans which also has drawbacks.

2. In order to fund the purchase of Twitter, Musk will be selling about $22 billion in Tesla stock. For the other portion, he is using his Tesla stock as collateral to secure a loan. This loan would default if Tesla's stock declined by 44%. Reportedly, the interest rate on the loan is 4.5%. This also increases the risk for Tesla shareholders as a sudden drop in the stock could trigger a default and lead to more selling.

3. Tesla is temporarily shut out of India. The company had been gaining momentum to sell its vehicles in that market including forming an entity and getting permits. However, the government decided that it would not allow Tesla to sell Chinese-made vehicles in India and that the company would be required to build its production facility in India to sell in India.

4. The final factor in Tesla's weakness is that these bearish developments have happened while the market is in a risk-off mood towards growth, tech, and EV stocks. Tesla has had incredible earnings growth, but it still remains overvalued with a price to sales of 14. While it remains the leading EV company, it's also going to face increasing competition from legacy automakers who are releasing their own models.