Elon Musk’s Tesla Share Sales Approach the $40-Billion Mark
A Troubling Trend for the Electric-Car Maker
As the world watches, Elon Musk continues to unload his Tesla shares at an alarming rate. The latest disposal of about 22 million shares this week has brought the total amount he’s offloaded since late last year to almost US$40 billion.
The Pressure Mounts on Twitter Inc.
Musk’s persistent selling after repeated assurances that he was done unloading Tesla stock reflects mounting pressure on the finances of Twitter Inc. His erratic and impulsive approach to running the social-media company has alienated advertisers, and efforts to bring in more revenue from subscription fees backfired when impostor accounts exploited a poorly executed rollout of verification badges.
The Chaos at Twitter: An Overhang on Tesla
The chaos at Twitter has been an overhang on Tesla, which is facing its own set of challenges. The electric-car maker has cut prices and production this quarter in China and taken the rare step of offering incentives in the U.S. Musk has said the company is struggling to cope with the effects that China’s slumping property market, Europe’s energy crisis, and the Federal Reserve’s interest rate increases are having on demand.
Tesla Shares Rally Amidst Challenges
Tesla shares rallied as much as two per cent as of 9:45 a.m. Thursday in New York. The stock has plunged 55 per cent this year. Musk tried for months to get out of the Twitter deal but ultimately failed. To help finance the purchase, he offloaded more than US$15 billion of Tesla shares before closing the transaction — about US$8.5 billion in April, then US$6.9 billion in August. In November, he sold another US$3.95 billion of his holdings.
The Debt Load on Twitter: A Concerning Development
Musk layered a significant amount of high-interest debt on Twitter’s balance sheet as part of his buyout. The company’s debt load swelled to about US$13 billion — up from US$1.7 billion pre-deal — and it’s now facing annual interest payments approaching US$1.2 billion. Its borrowing could get even more expensive because the interest rates on about half of that debt aren’t locked in and will rise with the market.
Musk’s Warning: Beware of Debt in Turbulent Economic Conditions
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At risk of stating obvious, beware of debt in turbulent macroeconomic conditions, especially when Fed keeps raising rates,’ Musk tweeted this week.
Musk’s Stake in Tesla: A Significant Reduction
Musk’s recent sales shrink his stake in the company to roughly 13 per cent, according to Bloomberg data. As of Wednesday’s close, he was worth US$160.9 billion, ranking No. 2 on the Bloomberg Billionaires Index after France’s Bernard Arnault. His fortune has dropped by US$109.4 billion this year.
A Concerning Trend for Musk’s Fortunes
With assistance from Venus Feng and Brian Chappatta.
Bloomberg.com
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The sale of his shares is a significant concern for investors, as it reduces his stake in the company and may indicate a lack of confidence in Tesla’s future prospects.
Conclusion
Musk’s recent sales are a worrying sign for Tesla and its investors. The company’s struggles with demand, competition, and rising costs have been well-documented, and Musk’s decision to sell more shares suggests that he may be feeling the pressure. As the world watches, it will be interesting to see how this trend continues to unfold.
Sources:
- Bloomberg
- CNBC
- Reuters