On Wednesday, shares of Tesla Inc. dropped to their lowest level in almost two years, after the disclosure that Chief Executive Officer Elon Musk had sold another $3.95 billion worth of shares in the company that manufactures electric vehicles.
Shares were last seen trading at $177.59, a decrease of 7.2% from their opening price on November 23, 2020.
Analysts claimed that Musk’s most recent share sale has increased apprehension about the impact of his $44 billion purchase of Twitter on the world’s most valuable carmaker. Investors were concerned about a number of issues as a result of the purchase, including the possibility that Musk might get distracted from operating Tesla and redirect resources to the social network startup. Some investors were concerned about the potential effect on Tesla’s sales and brand, in addition to the potential pressure that may be exerted on Tesla by nations who are attempting to censor speech that is expressed online.
According to Ed Moya, a senior market analyst at OANDA, “He may have required the money to truly finish the Twitter transaction, but restructuring the firm and righting the ship is likely to prove to be more expensive than he probably planned.”
“I believe investors are anxious that this may not be the end of his stock sales,” he said further. “I think this might not be the end of his stock sales.”
Since reaching a new all-time high on November 4 of last year, Tesla’s share price has dropped about sixty percent. After that, four days later, Musk began selling off his shares in the company.
Including this most recent transaction, Musk has now generated over $36 billion from the sale of Tesla stock since November of last year. This is despite the fact that Musk had previously said that he would not sell any more of his shares.
According to Dan Ives, an analyst at Wedbush Securities, Musk “once again loses further confidence with investors and his fans in a kid who cried wolf scenario.”
According to Ives, Musk has to put a stop to “Twitter overhang on the Tesla narrative with his attention back on the golden child Tesla,” which requires his time more than ever before given the weak macro, production/delivery challenges in China, and expanding EV competition from all corners of the world.
Musk said earlier this month that he believes a recession would persist until the spring of 2024 and that “a recession of sorts” in China and Europe is putting a damper on demand for his company’s electric vehicles.
According to the records that were made public by the United States, Musk sold 19.5 million shares between Friday and Tuesday of this week. late Tuesday afternoon at the Securities and Exchange Commission.
Analysts had anticipated that Musk would sell further Tesla shares in order to fund the $44 billion purchase of Twitter; nevertheless, it remained unclear whether or not the transactions were tied to the acquisition of Twitter.
The transaction was finalized by Musk one month ago with $13 billion in loans from banks and a $33.5 billion stock commitment. Of the $33.5 billion equity commitment, $7.1 billion came from investors, including Larry Ellison, co-founder of Oracle Corporation, and Saudi Prince Alwaleed bin Talal. It is unclear if all of the equity investors were able to fulfill the equity commitments they made.
A request for Tesla to comment on the reason for the share sale was not met with a response from the company.
Because of the debt that Musk loaded upon Twitter, the company is going to have to make interest payments that will total close to $1.2 billion in the next 12 months.
Since Musk took over as CEO of Twitter, the company has seen “huge” income loss, according to Musk, who blames pressure from civil rights activists on advertisers. A number of prominent advertisers, including General Motors, have removed their advertisements from Twitter because of fear that CEO Elon Musk would relax the platform’s policies on the filtering of user-generated material.
On Wednesday, the new owner of Twitter informed marketers that premium Blue membership accounts would become more significant and conspicuous going forward.