Elon Musk has sold an estimated $4 billion worth of Tesla stock days this week after reaching a $44 billion deal to purchase Twitter. Regulatory filing show the CEO offloading nearly 4.5 million shares of the automaker between April 26th and the 27th.
The timing of the transaction makes the why of the situation fairly obvious. Despite the resulting political hubbub, Musk reached an agreement on April 25th to acquire Twitter. The deal was tied up with tens of billions of dollars worth of his Tesla shares to support margin loans after the executive said he could come up with $21 billion in equity. While some questioned where the funding would come from, others claimed it was obvious.
According to Bloomberg, Tesla shares have risen by 3.2 percent as of 6:30 AM on Friday in New York, prior the start of regular trading. However the company has reportedly dropped $275 billion in market value since Musk first disclosed having taken a stake in Twitter early this month.
“It’s a brutal cycle for Tesla investors to navigate and casts a shadow on the name,” Dan Ives, a Wedbush analyst with the equivalent of a buy rating on the shares, told the outlet. “The Twitter deal is becoming an albatross for Tesla’s stock.”
Perhaps momentarily. Though Tesla’s stock remains nothing short of miraculous considering its production capacity vs legacy rivals. The EV manufacturer’s market cap is still hovering around $900 billion USD while the much larger General Motors is right around $56 billion USD. Musk has also confirmed that he’s likely done dumping Tesla stock for the foreseeable future.
Musk, 50, tweeted after the filings were released Thursday that he has “no further Tesla sales planned after today.” It’s unclear whether he might have done more than $4 billion worth of selling. The tweet could imply there were more disposals on Thursday that would have to be reported by Friday.
The Twitter deal is poised to be among the biggest leveraged buyouts in history, with Musk arranging $25.5 billion of debt and margin-loan financing from lenders including Morgan Stanley. If it were to fall apart, the party breaking up the agreement would be required to pay a termination fee of $1 billion under certain circumstances.
Twitter shares closed Thursday at $49.11, short of the $54.20 that investors will receive for each share they own under the company’s deal with Musk.
While some of the rhetoric surrounding the Tesla sale make it sound as though Musk is sacrificing the car brand to pursue the social media company, there is a smidgen of truth to those claims. The CEO has repeatedly shown that his involvement in just about any business venture has the potential to move the market and some are fearful that he wouldn’t be able to adequately oversee SpaceX, Tesla, his other companies, and now Twitter. Bloomberg even cited that the automaker was devalued after Elon asked the public whether he should reduce his stake before offloading $16 billion in shares in 2021.
But counter-arguments have been made suggesting that Tesla’s already high valuation simply hit the ceiling for what the current economy would allow. Either way, the company isn’t exactly suffering and released an earnings report earlier this month showing that it had exceeded its own sales target by delivering 310,000 vehicles from January through March of 2022 — up from 185,000 automobiles during the same period in 2021.
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