September 27, 2022

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Tesla CEO Elon Musk has sold $4 billion of stock in the electric vehicle maker,...

Tesla CEO Elon Musk has sold $4 billion of stock in the electric vehicle maker, in a likely move to help in his acquisition of Twitter.

The world’s richest man earlier this week courted more controversy, when he engaged with (and seemingly sided with) a couple of tweets that were highly critical of Twitter executives.

Musk’s comments came despite his agreement with Twitter, in which he agreed not to “disparage” the company or its representatives while he completes the deal.

elon musk, tesla, spacex
Image credit: SpaceX

Share sale

And earlier this week Tesla shares plummeted amid market concern that Musk would have to sell shares in Tesla in order to fund his personal contribution to the $44bn takeover of Twitter.

This worry caused Tesla’s shares to fall 12.2 percent on Tuesday, wiping off $126bn in value from the EV maker.

Indeed, Tesla shares have fallen nearly 20 percent since Musk disclosed his over 9 percent stake in Twitter on 4 April.

Analysts are worried how Musk, who is already CEO of Tesla and SpaceX, will find the time to deal with the complexity that is Twitter.

Musk is part-funding the Twitter deal with $21bn of his own equity and a further $12.5bn loan secured against his Tesla stake.

Now a SEC filing has revealed that Musk sold a total of 4.4 million Tesla shares, or 2.6 percent of his stake, on Tuesday and Wednesday.

Musk then pledged not to sell any more shares.

Share sell-off

This latest sell-off was Musk’s first share sale since he sold off a total of $16.4bn worth of stock in November and December last year.

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Since 8 November last year, Musk sold off billions of dollars worth of Tesla stock, after he asked Twitter users whether he should sell 10 percent of his shareholding in Tesla.

The response was yes he should offload the shares.

Musk then repeatedly sold tranches of shares so he could honour his Twitter promise, but that will likely expose him to a further colossal tax bill.

Vast wealth

Musk of course is the world’s wealthiest person, and is said to be worth over $275 billion, according to estimates by Forbes.

That wealth is derived from Musk’s ownership stakes in Tesla and SpaceX.

Musk holds a 43.6 percent stake in SpaceX (which is not publicly listed) that is reportedly valued at $100 billion.

Musk also still owns just over 168 million Tesla shares (roughly 17 percent), which is said to be worth around $188 billion.

Following the disclosure that Musk has sold off another tranche of Tesla stock, Peter Garnry, head of equity strategy at Saxo Markets, said there could be more issues for Tesla going forward, due to Musk’s Twitter deal.

“The Twitter deal raises questions for the future of social media. Expectations of wide-ranging changes by Elon Musk, especially given his ideas around free speech on the internet, could go either way,” said Saxo Markets Garnry.

“Alternative platforms are probably already under development, but whether they will see any interest will depend on how unpopular are Musk’s changes to Twitter,” said Garnry.

“Part of the deal is massive use of debt which multiplied with the current interest rates will eat most of Twitter’s immediate operating profits, but since the company is going private the profit generation is no longer the main objective,” said Garnry.

“Our view is that Musk’s acquisition of Twitter could be a problem for Tesla going forward as governments may use Musk’s ownership of Twitter against him in negotiations with Tesla,” Garnry concluded.

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