August 12, 2022

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Elon Musk sells $8.5 billion worth of Tesla stock

Elon Musk speaks to media in front of Crew Dragon cleanroom at SpaceX Headquarters in Hawthorne, California on October 10, 2019.

Musk sold 3.7 million shares of Tesla stock on Tuesday, for a total of $3.3 billion, and another 735,000 shares on Wednesday, bringing in $654 million, according to filings he filed with the Securities and Exchange Commission late Thursday.

On Friday morning, he revealed that he had sold an additional 5.2 million shares, worth $4.5 billion. Finally, it earned an average price of $883.09 per share.

Sales represent just 5.6% of Tesla’s stock he held at the start of Tuesday, and less than 4% of his total Tesla holdings if the stock options he controls are included.

The filings do not reveal the reason for the sale, but it appears that Musk is raising funds to buy Twitter.

at tweet “No more TSLA sales planned after today,” Musk said Thursday night, after the initial filings but before revealing Thursday’s sales.

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 investors could also sell shares this week in fear of it Musk will not be able to give much time and attention to Tesla. The company has ambitious growth plans and a growing competition.

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..

Musk is expected to use his massive Tesla holdings as a way to fund his Twitter purchase. But this does not mean that he needs to sell all of his shares to raise the entire purchase price. Alternatively, he can use the shares as collateral to obtain loans Collect money.

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.

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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.