Tesla’s fears (TSLA) – Get a free quote shareholders and followers are confirmed.
Elon Musk, the CEO of the famous high-end electric vehicle maker, is paying a heavy price for buying Twitter (TWTR) – Get a free quote.
And as expected, Tesla is paying the price. The billionaire just sold 19.5 million Tesla shares for a total of $3.95 billion, according to regulatory filings filed on Nov. 8 evening.
The sale was completed in 38 trades on November 4, 7 and 8, just days after the Twitter acquisition was completed. The tech mogul took control of the social network on October 27 after a six-month battle marked by twists and turns and a court standoff.
The documents thus confirm the speculations that have been circulating in recent days. According to those rumors, which Musk did not comment on, he was going to sell Tesla stock to cover the deal.
“Musk sold $4 billion in shares according to the Form 4 filing,” Wedbush analyst Dan Ives said. “The Twitter deal remains an albatross in many ways, but it looks like Musk’s stock-selling concerns should be over now. Tesla shares are down a lot after the Twitter deal. Disappointing situation for everyone.”
Twitter cost Musk a lot, $44 billion. The billionaire has about $13 billion in debt that is secured against his remaining stake in Tesla as part of the leveraged buyout. Since its acquisition on October 27, it has been trying to find sources of revenue for the social network.
The problem is, he’ll have to dig deeper than that because the company is losing $4 million a day, according to the billionaire. One by one, advertisers have suspended promoting their products and services on the platform, fearing it will turn into a “hell” under Musk, who describes himself as the “absolute of free speech.”
Ads account for more than 91% of Twitter’s revenue.
Gene Munster, chief executive of Loup Funds, warned on November 7 that Musk could be forced to sell additional Tesla shares if advertisers continue to leave Twitter.
“They have a month here to put things in the kitchen and get people to bring their products back and get advertisers to understand what their content moderation is,” Munster told CNBC on Nov. 7. “If the current environment bears this out, he should sell shares.”
“Avoid a Hot Sale”
This is the third time Musk has sold Tesla shares this year. It sold more than $8 billion worth of shares in the electric vehicle maker in April and sold nearly $7 billion worth of Tesla stock in August to finance the deal.
In August, he said during a Twitter exchange with a Tesla shareholder and fan that he had sold his shares to avoid having to do so urgently in case he was forced to buy. He also said he won’t sell any more Tesla stock, at least this year. At the time, technoking had taken its buyout offer off the table, but had to bring it back on October 4th just days before the start of a test that didn’t look good to him.
As such, it’s a huge face for the billionaire, whose core fortune is based on his shares in Tesla and his aerospace company SpaceX.
“@elonmusk are you done selling?” the Twitter user asked him on August 9.
“Yes,” Musk replied. “In the (hopefully unlikely) event that Twitter does force this deal to close *and* certain equity partners don’t materialize, it’s important to avoid an emergency selloff of Tesla stock.”
At the close of trading on November 7, Tesla shares fell to a 52-week low of $186.75
Tesla shares have fallen 15% since Musk finalized the deal on Twitter on Oct. 27. Since Musk announced his offer on April 25, Tesla shares have lost a total of 43% of their value to $191.30. This represents a drop in market value of approximately $454 billion.
Tesla, which was until now the world’s sixth largest company by market capitalization, was overtaken on November 7 by Berkshire Hathaway (BRK.A) – Get a free quotethe holding company of legendary investor Warren Buffett.
The more Musk gets involved on Twitter, the more Tesla sinks in the stock market. The billionaire said on Nov. 4 at the Baron Investment Conference that his workload had increased from “78 hours a week to probably 120” since he bought Twitter.
In the long term, Munster believes the Twitter acquisition won’t be much of a problem for Tesla, which has a roadmap filled with products like the Semi truck on December 1, the long-awaited Cybertruck in mid-2023, robotaxis in 2024 and human robot Optimus in 2023.
“Musk’s Twitter buy means very little for the future of Tesla and SpaceX,” Munster wrote in a research note last month. “He will continue to give most of his energy and time to both companies.”