It appears that Tesla
CEO Technoking Elon Musk recently determined yet again that he needed to sell a lot of Tesla shares (NASDAQ:TSLA) in order to have cash available for Twitter. Or perhaps he sold for other reasons, but that was his rationale for the prior two periods of major TSLA sales.
Notably, this is the second round of major TSLA sales by Elon Musk that has come after he indicated to a popular Tesla fan and shareholder on Twitter at the end of April that he thought he was probably done selling shares of Tesla in order to help fund Twitter.
It also comes a couple of months after a quarterly Tesla conference call for shareholders in which he vehemently talked up Tesla stock as having enormous potential. The statements stood out so much that many Tesla fans, critics, and shareholders immediately joked that he was clearly hyping up the stock and likely to sell shares. One of his statements in that conference call, which seemed to be unplanned, was that he expected Tesla’s market cap could surpass that of Apple’s and Saudi Aramco’s combined at some point.
Elon Musk now thinks Tesla’s market cap will be able to surpass that of Apple and Saudi Aramco *combined*.
— Zachary Shahan (@zshahan3) October 19, 2022
Since that statement, Tesla’s stock price has dropped from $222.04 to $156.80. The company’s market cap has dropped from about $695.75 billion to about $491.33 billion.
Now, there’s nothing that says life can’t change! Also, I don’t personally care that Elon Musk just sold ~$3.6 billion of Tesla stock, leading to the stock declining significantly this week. However, a pattern has developed with Elon selling Tesla shares when previous statements indicated he probably wouldn’t be. In fact, if you look back further, to mid-2018, you can see that he statement back then that aside from selling ~$100 million in Tesla stock every few years to give to charity, he didn’t expect to really “cash out” for 20 years, and that would be to finance a SpaceX mission to Mars.
Elon once said that he would be “the last one to sell his Tesla stocks”. Eventually saying that he would sell his major stake in Tesla in about 20 years to finance SpaceX’s Mars plans. pic.twitter.com/svFmJjAYCG
— Frunker 🇨🇦🦌 (@MFrunker) December 14, 2022
That statement was far off the mark. Again, things change, but it’s worth noting when someone makes significant predictions like this and they end up being untrue or misleading.
“According to financial research firm VerityData, Musk has sold 94,202,321 shares so far this year at an average price of $243.46 per share for pre-tax proceeds of approximately $22.93 billion,” CNBC reports.
Also, it should be noted that Musk’s big stock sales make it harder to evaluate why Tesla stock has dropped as much as it has. The stock has been down significantly while the market as a whole bounces up, including the tech sector that Tesla stock often trends with. Any claims — from Elon Musk included — that Tesla stock has dropped due to macro factors like inflation or fears of recession are harder to evaluate when Musk has been selling billions of dollars in shares. Similarly, concerns that Tesla stock as been sliding due to Elon Musk’s activity on Twitter and hyping up of conspiracy theories are harder to prove as well. (Though, plenty of research has shown a sharp decline in sentiment around the Tesla brand.)
Elon blaming $TSLA decline on macro is disengenuous. There’s a piece that’s due to macro. But vast majority is self-inflicted. Since TWTR deal closed on 10/28, TSLA -31%; NDX +2%. If macro, other tech stocks would be down 20%+. TSLA down to Elon sales, TWTR noise and China miss.
— Gary Black (@garyblack00) December 14, 2022
Then there’s also the matter of Tesla’s level of demand and production in China, which some analysts and shareholders have been concerned about. Has that really been influencing Tesla stock to a notable degree?
Tesla’s stock price is down 51.8% or $168.53 per share in the past year. While Elon Musk’s own sales of billions of dollars of stock has been part of that decline, one cannot attribute a market-cap decline of more than half a trillion dollars to those sales. Most likely, all of the factors mentioned above played a part in the decline in share value — Elon Musk’s own sales and the effect of those on other shareholders, his Twitter activity, his leveraging of Tesla shares to help finance the Twitter acquisition, macro factors like inflation and fears of recession, concerns about Tesla demand in China, deep hits to Tesla’s brand, and more.
How do things change from here for Tesla stock and Tesla shareholders? Who knows? Will Elon sell billions of dollars of shares again in coming weeks or months? No one knows. Nothing above is guidance stock market guidance, but it sure is an interesting stock story to watch.
Does selling Tesla shares to fund Twitter make much sense? Well, it’s very hard to see how one can argue that case without being deep down a rabbit hole or without believing that Tesla’s market cap is far too high and will continue to decline. I don’t fall into either camp, so I find it odd and a bit disconcerting that Elon broke his loose 20-year plan for Tesla stock after just about 4 years and a few Twitter triggers. I also find it odd that he focused so much on Tesla’s potential to become more valuable than Apple and Saudi Aramco are combined just before selling billions and billions in Tesla stock. Alas, we are talking about Elon Musk, and it is 2022 — many expectations and predictions are off the table at this point.
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Source: Clean Technica