Elon Musk sells $8.5 billion worth of Tesla stock

Company insiders, such as Musk, must report purchases or sales of company stock to the Securities and Exchange Commission to inform the broader investment community of their activity. But they have two days to make that deposit and they still stick to the rules.

Musk’s sales of Tesla stock were large enough to sink the company’s stock price. The 3.7 million shares sold on Tuesday represented 17% of the normal daily turnover in Tesla shares so far this year before Tuesday. Tesla shares lost 12.2% of their value during Tuesday’s trading, the largest one-day drop in the company’s stock since September 2020. The stock’s drop triggered a sell-off by other investors, with 45 million shares traded – about double. Trading volume from the previous day.

Tesla shares barely changed on Wednesday and Thursday. The stock was up 5% in morning trading on Friday, with his tweet apparently confirming to investors that its sales had completed..

But there are limits to how much money he can raise simply by pledging his Tesla shares as collateral. He can raise more money by selling part of his Tesla stock. Tesla’s rules state that company officials and directors can only increase 25% of the value of shares pledged as security.

As of June 30, 2021, company filings show that Musk had already pledged 88.3 million of his Tesla shares as collateral, but those shares were pledged years ago when Tesla shares were worth a small portion of their current value. He will probably be able to borrow more money even for some of these shares. And the 79 million unrelated shares he owns after Tuesday’s sales could be used to borrow $17 billion, even with the recent drop in Tesla’s share price.

Correction: An earlier version of this story misidentified the initial number of Tesla shares that Elon Musk sold, the value of the shares, and when he sold them. Musk sold 4.4 million shares, valued at $4 billion, on Tuesday and Wednesday.