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Why did Musk sell huge chunks of Tesla shares?

Tesla shares

Elon Musk sold around $8.4 Billion worth of his Tesla shares while seeking to line up the money to buy Twitter. According to the filings with the US Securities and Exchange Commission, the billionaire claims he will not sell any more of his Tesla shares or Tesla stock after this day.

Offloading Bulk of Tesla Shares

Musk sold the bulk of his Tesla shares and offloaded 4.4 million shares. He sold another 5.2 million shares the following day, after which he tweeted, “No further TSLA sales planned after today.”

On 25 April 2022, Twitter’s board of directors accepted Musk’s offer of $54.20 per share, or $44 billion, for total control of the company. It was the same price he named in his initial offer on April 14th. Upon completion of the transaction, Twitter will become a private company. The deal still requires shareholder and regulatory approval.

In order to fund the deal, Musk has promised to secure $25.5 billion of fully committed debt, including $12.5 billion in loans against his Tesla stock. Notably, Musk does not list any equity partners with which to share the cash burden. The Tesla CEO already owns a 9 percent stake in Twitter, valued at roughly $2.9 billion.

Plunging Value of Shares

Tesla shares have lost around 20% of their value since Musk revealed his initial stake in Twitter, raising questions from investors about the unintended consequences for his electric car company. Musk is Tesla’s biggest shareholder, owning around 17 percent of the company’s shares, or about 175 million shares in total. Musk has sold large batches of shares before. Last year, he sold 15 million shares, worth more than $16 billion, after polling his followers on Twitter. The carmaker’s shares plunged 16 percent the following two trading days.

Tesla has a famously volatile stock, but Tuesday’s 12 percent drop was its worst daily decline since September 2020, when it lost around 21 percent of its value, according to The New York Times. Some investors, including Musk himself, have suggested that Tesla’s share price is overvalued. The company’s market cap has moved well beyond $1 trillion.

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