Elon Musk sold nearly $4 billion worth of Tesla stock after the Twitter deal closed

New York
CNN Business

Elon Musk sold $3.95 billion worth of Tesla stock after buying Twitter late last month.

The sale of Musk’s Tesla stock, a total of 19.5 million shares, has been highly anticipated since the Tesla CEO struck a deal to buy Twitter for $44 billion. Musk sold blocks of Tesla shares worth a total of $15.4 billion after the deal to buy Twitter was announced earlier this year.

Twitter confirmed Musk’s purchase of the social media company on Oct. 27, but he waited until Nov. 4 to begin selling additional Tesla shares. He also sold blocks of Tesla stock on Monday and Tuesday this week, according to filings with the Securities and Exchange Commission on Tuesday night.

It’s not clear whether the money Musk raised went toward the Twitter acquisition or to shore up losses after the Twitter incident.

Musk revealed last week that Twitter had seen a “huge drop in revenue” as a growing number of advertisers stopped spending on the platform after taking over the company. He blamed the loss of advertising dollars on “activist groups” that put pressure on advertisers.

Twitter lost $270 million in the quarter ended June 30, well before Musk took over and advertisers began fleeing. As of June 30, it had just $2.7 billion in cash on its balance sheet. It announced plans to charge users $8 a month to verify accounts, as well as layoffs.

Dan Ives, technology analyst at Wedbush Securities, said Musk’s two-week ownership of Twitter was “a disruption of epic proportions.” While it’s possible Musk’s money from the Twitter sale over the past two weeks has been used to pay off some of the short-term financing used to close the Twitter deal, it can’t be ruled out that it was necessary as a result of the big losses. Twitter.

“The more he gets on Twitter, the more of a deal it becomes,” Ives said.

This is not the best time to sell Tesla stock, which has lost 46% of its value so far this year due to disappointing sales caused by supply chain issues. Musk received an average of $202.52 for the Tesla shares he sold after the Twitter deal closed, down 10% since closing the deal to buy Twitter.

Shares of Tesla ( TSLA ) fell 1.5% in premarket trading on Wednesday.

The company is facing increasing competition in the electric vehicle market from well-known automakers such as Volkswagen, Ford and General Motors. Some investors have expressed concern that Musk will be too distracted by buying Twitter, and that he will devote enough attention to solving Tesla’s problems.

“Tesla investors are getting worse from this never-ending Twitter albatross,” Ives said. “Musk needs to look in the mirror and end Twitter’s constant celebration of the Tesla story by focusing on Tesla, the golden boy who needs more time than ever.”

These three most recent blocks of Tesla stock sales represent just 4% of the shares Musk owns directly through the trust, and less than 3% of his holdings if options are included to buy additional shares.

Musk agreed to buy Twitter ( TWTR ) in April, shortly after filings showed he bought 73 million shares, or about a 9% stake, for $2.6 billion. The acquisitions made him the company’s largest shareholder.

Shortly after the deal was announced, he announced he was selling $8.5 billion worth of Tesla stock, seen as the first step toward raising the cash needed to complete the Twitter acquisition.

Even after Musk announced a change of heart and fought off a lawsuit filed by Twitter to force him to buy the company, Tesla continued to sell off. Filings in August showed he sold an additional $6.9 billion worth of Tesla stock.

Musk’s filings did not explain the reason for these earlier stock sales. But after someone on Twitter asked him if he was selling Tesla stock, he said “Yes” and then cited the possibility of being forced to buy Twitter as the reason for those sales.

Since Musk’s previous Tesla sales, Tesla’s stock has split one-to-three, meaning he would have to sell three times as many shares to make as much money. But his share of Tesla stock also tripled because of the split.

Prior to his interest in Twitter, Musk rarely sold shares of Tesla stock, primarily to cover taxes on exercising stock options.

He sold a total of 15.7 million pre-split shares at the end of 2021, earning a total of $16.4 billion, because he had to exercise his stock options or risk their expiration. He likely ended up with a tax bill of over $10 billion. But even after paying that tax bill and the costs of exercising those options, he probably has about $5 billion left. He may have used some of that money to buy his first stake in Twitter.

These latest sales represent the lowest price at which Musk has recently sold Tesla shares, about 30% lower than his sales in April and August and 42% lower than the price he paid when he sold his shares, adjusted for the Tesla stock split since then. End of 2021.

— CNN Business’ Clare Duffy and Catherine Thorbecke contributed to this report

Source link