Musk sold 4.4 million shares of Tesla shares at an average price of $ 903.58, according to documents he made to the Securities and Exchange Commission on Thursday. Sales accounted for only 2.6% of Tesla’s shares, which he held straight at the beginning of Tuesday’s day, and less than 2% of his total holdings in Tesla, if the options for shares he controls are included.
The documents do not reveal the reason for the sale, but it seems that Musk is raising funds to buy Twitter.
In a tweet Thursday night, Musk said, “No more TSLA sales are planned for today.” But it was unclear whether Musk had made other unsafe sales since Wednesday.
Company insiders, such as Musk, must report purchases or sales of their company’s shares to the SEC to inform the wider investment community about their activities. But they have a few days to make that submission and still follow the rules.
Musk’s sales of Tesla shares were large enough to lower the company’s share price. Most of the shares he said he sold this week – 3.7 million – were sold on Tuesday. This represents 17% of the normal daily value for trading in Tesla shares so far this year before Tuesday. Tesla shares lost 12.2% of their value during trading on Tuesday, the biggest one-day decline in the company’s shares since September 2020. The decline in shares caused a pile of other investors, as 45 million shares were traded – about twice the volume of transactions from the previous day.
Tesla investors could also sell shares this week for fear that Musk would not be able to devote as much time and attention to Tesla. The company has ambitious plans for growth and growing competition.
Shares of Tesla almost did not change on Wednesday and Thursday. Shares rose 3% on pre-market trading on Friday.
Musk is expected to use his vast Tesla holdings as a way to fund his Twitter purchase. But that doesn’t mean he has to sell all his shares to raise the full purchase price. Instead, he can use the shares as collateral for loans to raise money.
But there are limits to how much money he can raise simply by pledging his shares to Tesla as collateral. He can raise more money by selling part of his shares to Tesla. Tesla’s corporate rules state that employees and directors of the company can raise only 25% of the value of the shares pledged as collateral.
As of June 30, 2021, company documents show that Musk has already pledged 88.3 million of its shares in Tesla as collateral, but those shares were pledged years ago when Tesla’s shares were worth a small part of their current value. He will probably be able to borrow more money even for some of these shares. And the roughly 79 million unlisted shares he owns after Tuesday’s sale could be used to borrow $ 17 billion, even with the recent drop in Tesla’s share price.
Correction: An earlier version of this story incorrectly stated the number of Tesla shares sold by Elon Musk, the value of the shares and when he sold them. Musk sold 4.4 million shares worth $ 4 billion on Tuesday and Wednesday.
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