The Securities and Exchange Commission received several documents late on Tuesday night detailing the sales from Friday through Tuesday. They represent Musk’s first Tesla share transaction since April when he sold 9.6 million shares for a total of $8.5 billion.
These April trades happened not long after Musk and Twitter agreed to a $44 billion purchase agreement. However, he stated a month ago that he would not be following through with that agreement, claiming that Twitter management had withheld critical information about the number of user accounts that were spam and bot accounts rather than accounts managed by real people. Swift legal action was taken by Twitter to compel Musk to proceed with the April agreement’s conditions.
The rationale for the stock sales was not revealed in Musk’s papers. However, in response to a question on Twitter about whether he was done selling Tesla stock, he replied that he was and explained that this most recent sale was motivated by the risk of being compelled to acquire Twitter.
He tweeted: “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.”
However, he had also tweeted that there would be “no further TSLA sales planned after today” when he sold the Tesla (TSLA) shares in April.
He responded affirmatively to a question from another user on Twitter on Tuesday. The user had inquired about the potential of Musk’s buying up Tesla stock once again if the Twitter transaction fell through.
Tesla’s stock has lost close to twenty percent of its value so far this year, but it has gained fourteen percent since it released its July earnings report.
A tech analyst at Wedbush Securities Daniel Ives stated that “this is the last thing Tesla investors want to see. The biggest fear has been that Musk sells more stock, and that’s what just happened. It’s a near-term gut punch. There’s no explanation and that adds to the uncertainty.”
The Reason Behind Elon Musk’s Prior Sale of Tesla Shares
In the past, Musk sold Tesla shares when he needed funds to pay taxes on the exercising of options that were about to expire. The first large-scale sale of Tesla stock by Musk—made in April shortly after the Twitter agreement—was for reasons other than an impending tax payment.
For the recent share sales, Musk received an average price of $869 per share. This is significantly less than the $1,046 average price he obtained when selling 15.7 million shares late last year. In April, the average price he received for his Tesla sales was $883 per share. When he exercised options that were about to expire, he was faced with a record personal income tax bill that needed to be paid. This transaction was made to cover the cost.
Musk still owns 155 million shares of Tesla despite the most recent stock sales, and he has the option to purchase an additional approximately one hundred million at prices way below market value. Approximately twenty percent of Tesla’s outstanding shares are under his control thanks to his ownership of shares and options in purchasing additional shares. Additionally, less than three percent of the shares and options he currently holds were part of the 7.9 million shares he recently sold.