Thursday September 29, 2022

Elon Musk sells $8.4 Billion of Tesla stock to help finance the Twitter takeover

According to filings with US Securities and Exchange Commission, Elon Musk sold approximately $8.4 billion worth his shares in Tesla this week to raise money to buy Twitter. The billionaire claims that he will not sell any more Tesla stock after today. According to filings, Musk sold the majority of his shares on Tuesday and Wednesday, releasing 4.4 million shares. He also sold another 5.2million shares on Thursday. After that, he tweeted: “No further TSLA sale planned after today.”
Tesla’s share price plunged 12 percent Tuesday, but has since risen steadily. The stock was up 3.9 percent on Friday.
The board of directors of Twitter accepted Musk’s offer of $54.20 per shares, or $44 Billion, to take total control of the company. It was the same price that he had offered on April 14th. Twitter will be a private company upon completion of the transaction. The deal is still subject to shareholder approval and regulatory approval.
Musk has pledged to secure $25.5 Billion of fully committed debt, which includes $12.5 Billion in loans against Tesla stock. Musk doesn’t list any equity partners to share the cash burden. Tesla CEO Musk already holds a 9 per cent stake in Twitter, which is valued at approximately $2.9 billion.
Tesla shares have lost about 20% since Musk disclosed his initial stake in Twitter. This raises questions from investors about the unintended consequences of Musk’s electric car company.
“I believe that the Twitter news is a bad time for Tesla shareholders because there are so many important milestones and targets for Tesla over the next six to nine months,” Wedbush Securities analyst Daniel Ives said to The Verge. He cited the long-delayed Cybertruck and Tesla’s new 4680 batteries, as well as the continued buildout at the Gigafactories of Texas and Germany, and the recent reopening the company’s China factory.
Ives said, “It just adds one variable to a jittery marketplace.” “It’s certainly caused angst at the Street.”
Musk is Tesla’s largest shareholder. He owns around 17 percent of the company shares, or approximately 175 million shares. Musk has previously sold large quantities of shares. After polling his Twitter followers, Musk sold 15 million shares last year, which was worth more than $16billion. The shares of the carmaker plunged 16% in the two trading days that followed.
Tesla is a notoriously volatile stock. Tuesday’s drop of 12 percent was its worst daily decline since September 2020 when it lost around 21% of its value according to The New York Times. Musk and other investors have suggested that Tesla’s share prices are overvalued. The company’s market capital has risen to well over $1 trillion.
Analysts also pointed out that Musk’s Twitter offer could lead to Musk’s attention being split. Musk is also the CEO of SpaceX, Neuralink, and Boring Company.
Tesla’s most recent quarterly earnings report cites Musk’s potential risk of splitting his time between his other companies. The company stated that it is dependent on Elon Musk, Technoking of Tesla, and its Chief Executive Officer. “Mr. Musk spends significant amounts of time with Tesla and is active in our management, but he doesn’t devote his entire time and attention to Tesla.”

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