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.
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 3% in early afternoon trading on Friday, with its tweet apparently confirming to investors that its sales had been completed.
“It looks like the amount he’ll have to sell is now known. That’s why the stock rebounded,” said Jane Munster, managing partner at Loup Ventures. “I actually thought he’d have to sell more shares than this.”
“Besides the issues of distraction, it brings back the circus-like setting of the Tesla story that has nothing to do with Tesla,” said Ives. Ives said the uncertainty over the Twitter deal — the shares are trading 8% below their agreed purchase price — only adds to the uncertainty about what Musk will do with his Tesla stock.
“He says it’s the end and that makes me think it probably is,” said Ives. “But the street will be watching closely to see if this is really the end.”
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.
Even if Musk doesn’t use those shares as collateral, the 67 million unrelated shares he owns after this week’s sales could be used to borrow nearly $17 billion — even with the recent drop in Tesla’s stock price.
But Munster said Musk probably doesn’t want to go directly to that limit, because if Tesla stock falls further, he may have to sell some shares in the future.
“This is a very volatile stock. Its value has increased tenfold in just the past few years. These stocks can decline,” he said.
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.
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