Elon Musk Sells Another $3.6 Billion In Tesla Stock To Prop Up Twitter

Key Takeaways

• Elon Musk sold another $3.6 billion of Tesla stock in December, after selling nearly $3.95 billion in November.
• Earlier stock sales were to help with the acquisition of Twitter, but reasons were not disclosed for the latest sale.
• Tesla shareholders are becoming increasingly upset with Musk, who has stated multiple times he will stop selling stock, only to sell additional shares.

Earlier this month, Elon Musk sold another $3.6 billion worth of Tesla stock for reasons that have not been made public. Earlier sales of Tesla shares in 2022 helped Musk fund the purchase of Twitter. The question from this sale is whether Musk will continue to sell additional shares of Tesla stock, even though he has publicly vowed to stop multiple times. Here is what investors need to know.

Why is Musk Selling Tesla Stock?

Elon Musk began selling large blocks of Tesla stock in April 2022 to help finance his purchase of Twitter. He initially sold $8.5 billion shares in April, another $6.9 billion in August 2022, $3.95 billion in November, and $3.6 billion in December for a total of around $22.9 billion.

The main reason for selling off Tesla stock was to fund Mr. Musk’s purchase of the social media company Twitter as most of his wealth is tied up in Tesla stock. The deal for Twitter closed in late October 2022, and Mr. Musk has continued to sell off more TSLA stock since. It’s unknown why he made the latest stock sale in December, but he claims he will stop selling his stock for up to 18 months.

As of this writing, Tesla stock has lost 60% of its value in 2022. This is due to a combination of factors, including shareholders thinking Twitter is taking up too much of the Tesla CEO’s time, fears of a recession in 2023, production pauses at Tesla, and Musk selling close to $22.9 billion in stock.

Twitter’s Impact on Tesla

Before the purchase of Twitter, Mr. Musk was involved in the day-to-day operations of Tesla and SpaceX. In the few short weeks since the sale closed, Mr. Musk has been spending the majority of his time with Twitter in an attempt to pay off the large amount of debt he took on to buy the company. This has had the effect of pulling him away from the operations of SpaceX and Tesla, along with his stock sales helping to tank Tesla’s stock price.

Mr. Musk’s purchase of Twitter and subsequent absence from Tesla’s daily operations has upset Tesla shareholders to the point they are openly criticizing him in the media, and with good reason. Ross Gerber, an investor looking to gain a seat on Tesla’s board of directors, noted that Mr. Musk’s actions had eliminated $600 billion in Tesla’s valuation. Tesla is facing a critical juncture regarding its position at the top of the electric vehicle industry. Mr. Musk’s Twitter distraction won’t help Tesla pivot and stay ahead of established auto manufacturers.

One of the issues that Mr. Musk seemingly overlooks is the impact his statements on Twitter have on his car buying audience. Buyers looking at buying a Tesla as an eco-friendly means of transportation are now considering buying EVs from other manufacturers due to Mr. Musk’s public statements on Twitter. Buyers are finding that they don’t want to buy a car from someone whose values don’t align with theirs.

Tesla is also dealing with production problems in China, a once-promising market for selling Tesla vehicles. Chinese buyers aren’t necessarily concerned about Mr. Musk’s Twitter antics, but the production of Tesla vehicles is suffering from supply chain issues. Disruptions in the supply chain make it more challenging to deliver completed vehicles to the Chinese market, and there’s already plenty of competition from Chinese EV manufacturers. Adding insult to injury is the fact Tesla had to shut down its Shanghai production plant for no stated reason, but a COVID-19 outbreak is suspected as the cause.

Will There be More Selling of Tesla Stock?

It’s difficult to predict Mr. Musk’s next move with his remaining shares of Tesla stock. He stated multiple times in 2022 that he would stop selling his stock, most notably in August when he tweeted, “In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock.” Mr. Musk once again stated that he wouldn’t sell more stock after his sell-off in December 2022, saying, “I won’t sell stock until — I don’t know — probably two years from now. Definitely not next year under any circumstances, and probably not the year thereafter”.

These moves make it difficult for shareholders to have faith in Mr. Musk as CEO of Tesla, as he’s demonstrating that he can’t be trusted. Part of a stock’s value is the trust investors have in a CEO’s governance of a company, and Mr. Musk’s actions are creating a loss of shareholder confidence in the company.

Another issue with Mr. Musk selling off large portions of his stock is that large stock sales are typically a signal that the CEO isn’t confident in the company’s performance and is looking to profit before exiting. This may not be the case with Tesla, but CEOs have insider knowledge that investors don’t have, and investors may see the use of the money to pay off the Twitter debt as an excuse or cover.

Tesla’s loss of stock value may be what stops Mr. Musk from selling off more shares, but there are no guarantees that he’ll behave in a responsible fashion going forward. As it currently stands, he blames the loss of stock value on the Federal Reserve’s increase of the federal funds rate, among other large-scale economic factors.

Bottom Line

With the recent sale of $3.6 billion in Tesla stock, Elon Musk has sold close to $23 billion worth of Tesla shares. Shareholders of Tesla have become increasingly angry at the CEO for various reasons, including his continued sale of stock even though he stated multiple times he was done selling. The good news is that Musk appears to be stepping down as Twitter CEO and can begin to focus on Tesla once again. This alone should appease shareholders, and hopefully, Musk can follow through on his promise of not selling additional shares for the foreseeable future.