Elon Musk Dumps $6.88 Billion In Tesla Stock

Key Takeaways

• Elon Musk has sold almost $7 billion worth of Tesla stock in recent days, despite announcing in April he had no further sales planned.
• It brings the total liquidation to over $15 billion so far this year, and almost $32 billion over the past 12 months.
• Speculation is that the funds are being gathered in order to fund Musk’s lawsuit with Twitter, and to provide capital should he be forced to pay a fine or go ahead with the purchase

Details of the recent sales were released on Tuesday night, showing that Tesla CEO Elon Musk had sold $6.88 billion of Tesla stock between August 5th and August 9th. The sale follows the sale of $8.4 billion in stock back in April.

The information was disclosed as part of the company’s regulatory filings with the SEC, which are required to be made when an influential company figure, such as the CEO, sells stock in the company.

On April 29th this year, Musk took to Twitter to announce that he had “no further TSLA sales planned after today,” however this recent trade brings his total withdrawals this year to over $15 billion.

The reasons for the sale are not required to be disclosed, however Musk is currently in the middle of a lawsuit with Twitter, after backing out of his proposed purchase of the social media platform.

He raised concerns about the number of fake accounts, or bots, and the lawsuit centers on whether these figures are much higher than reported by Twitter.

Details of Elon Musk’s sale of Tesla stock

In the most recent transactions, Musk sold 7.92 million shares in Tesla, with an estimated value of approximately $6.88 billion. The sales took place between August 5th and August 9th, coming off the back of the company’s annual shareholder meeting on August 4th.

There are strict rules surrounding the timing and disclosure of the sale of stock for influential people within a company, such as the chief executive officer, chief financial officer and members of the board of directors.

The aim behind this is to limit insider trading, as executives in these positions could otherwise take advantage of inside knowledge to buy or sell stock when they know new information is going to move the stock price.

Musk has now liquidated over $15 billion in Tesla stock over the past few months, and it’s not the first time he’s sold this much.

Just last year, he sold off over $16 billion worth after running a poll on Twitter asking his followers whether he should sell or not. The market didn’t react kindly to the move and Tesla shares dropped 16% over the subsequent two days.

This brings Musk’s total sales to over $32 billion over the past 12 months.

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He might need the cash for his lawsuit with Twitter

Elon Musk is a man with expenses. He may not have joined Jeff Bezos or Roman Abramovich in the super yacht wars, but launching rockets and colonizing mars aint’ cheap either. But it’s also unlikely to be the reason for dumping the Tesla stock.

It could be that he’s building a fund in order to fight his ongoing lawsuit with Twitter. It came off the back of his announcement earlier this year that he would be acquiring the company for $44 billion and would be taking it private.

This involves buying out the majority of Twitter’s current shareholders, and moving the company off the public markets. It would mean an end to the requirement of providing quarterly market updates, and generally would allow Elon Musk to operate the company without disclosing company operations to the public.

Taking a company private can create a greater focus on long term plans, without the need to satisfy shareholders with short term performance.

Musk has since attempted to pull out of the deal, after raising concerns about the number of bots, or fake accounts, running rampant on the platform. From a valuation perspective, this could drastically change the true user numbers, which in turn would reduce the value of the business.

Twitter is holding strong and has filed a lawsuit against Musk to force him to proceed with the purchase, or at least pay a hefty penalty of potentially over $1 billion.

What does Elon Musk’s Tesla share sale mean for shareholders?

While the sale off the back of the Twitter poll dropped Tesla’s stock price by over 16% in just a couple of days, the sale earlier this year had the opposite effect, with the price rising just over 3% over the next three days.

The stock price was up slightly in pre-market trading on Wednesday following the Tuesday night announcement, so it may be that investors are unconcerned about the sale. It remains to be seen whether the distraction of the Twitter lawsuit has a longer term impact on the company.

The takeaway for investors

Right now is a difficult market for investors to navigate. There’s plenty of information on both sides of the fence, some is very negative while other data is surprisingly positive. Job numbers, for example, were very strong last month while the high level of inflation continues to put pressure on households.

From an investment standpoint, one of the best ways to protect against the volatile state of the market is to implement hedging strategies. These allow investors to continue to gain benefits from the potential upsides of the market, whilst limiting the damage if stocks continue their slide.

These types of strategies are very difficult to put in place, and they’re generally limited to high net worth investment banking and hedge fund clients. But at Q.ai, we’ve found a way to make them available to everyone.

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