Elon Musk sells Tesla shares worth nearly $7bn

The billionaire says he needs cash in case he is forced to proceed with his aborted deal to buy Twitter

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Tesla chief executive Elon Musk sold $6.9 billion of his shares in the electric car maker, his biggest sale on record, saying he needs cash in case he is forced to proceed with his aborted deal to buy Twitter.

“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,” the world's richest person tweeted on Tuesday night, after the sales were disclosed in a series of regulatory filings.

Asked by followers if he was done selling and whether he would buy Tesla stock again if the $44 billion deal did not close, Mr Musk, 51, said “yes”.

The billionaire offloaded about 7.92 million shares on August 5, according to the new filings.

The sale comes only four months after he said he had no further plans to sell Tesla shares after disposing of $8.5bn of stock in the wake of his initial offer to buy Twitter.

Since then, Tesla’s shares have rebounded from lows reached in May, benefiting from broader gains in US equities.

“He certainly is clarifying that he is cashing up for Twitter,” said Charu Chanana, strategist at Saxo Capital Markets in Singapore.

“The timing of the sale — just ahead of the US CPI [consumer price index] release — does say something though. The bear market rally has started to falter, and further repricing of Fed expectations could mean more pain for equities ahead, especially in tech.”

Tesla shares have risen about 35 per cent from recent lows reached in May, although are still down by about 20 per cent this year.

The electric car maker's market fortunes have been tied to those of the Twitter deal since Mr Musk made his surprise overture earlier this year.

Mr Musk last month said he was terminating the agreement to buy the social network, where he has more than 102 million followers, and take it private, claiming the company has made “misleading representations” over the number of spam bots on the service.

Twitter has since sued to force Mr Musk to close the deal, and a trial in the Delaware Chancery Court has been set for October.

In May, Mr Musk dropped plans to partially fund the purchase with a margin loan tied to his Tesla stake and increased the size of the equity component of the deal to $33.5bn.

He had previously announced that he secured $7.1bn of equity commitments from investors such as billionaire Larry Ellison, Sequoia Capital and Binance.

In his tweets on Tuesday, Mr Musk said the sale of shares was also a contingency measure in the event those private investors did not come through.

At the weekend, Musk tweeted that if Twitter provided its method of sampling accounts to determine the number of bots and how they are confirmed to be real, “the deal should proceed on original terms”.

The Twitter deal included a provision that if it fell apart, the party breaking the agreement would pay a termination fee of $1bn, under certain circumstances.

Legal experts have debated whether the conflict over spam bots is enough to allow Mr Musk to walk away from the deal.

“I will put the odds at 75 per cent that he is buying Twitter. I’m shocked,” said Gene Munster, a former technology analyst who is now a managing partner at venture capital company Loup Ventures.

“This is going to be a headwind for Tesla in the near term. In the long term, all that matters is deliveries and gross margin.”

Mr Musk has now sold about $32bn worth of stock in Tesla over the past 10 months.

The disposals began in November after Mr Musk polled Twitter users on whether he should trim his stake in the platform. He now owns 14.84 per cent of Tesla, leaving him still by far the largest stakeholder.

Updated: August 10, 2022, 5:27 AM
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