Elon Musk sold Tesla stock worth $6.9 billion: Sceptical about winning legal battle against Twitter?

In a surprise manner, Elon Musk sold $6.9 billion of stock in Tesla Inc. citing the ongoing legal battle with Twitter as a reason. Musk wants to be prepared for all kind of situations, be it favouring or otherwise. The decision is taken to avoid a desperate sales if he is direct to concluded the Twitter acquisition deal.

According to regulatory filings, Tesla’s chief executive sold 7.92 million shares of his holding in tesla Inc. on August 5, 2022. Musk tweeted that he would repurchase the shares of the electric-car maker, if the deal with Twitter does not close.

Musk hinted that, in the unlikely event, some of the equity partners may back off if he is pushed forward to close the Twitter acquisition deal. Hence, the recent sale of Tesla stock worth $6.9 billion is as a part of contingency planning to avoid last minute hash-hush sale of Tesla stock at lower than the fair market value.

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Tesla rose 3.4%, to $879, before regular trading began Wednesday. Twitter surged 4.3% to $44.69. It would be interesting to see the impact of Musk’s offloading move.

Musk has been on the selling spree since the last November. So far, Musk has sold Tesla shares worth $32 billion in less than 10 months. Just four months ago, after selling Tesla stocks worth $25 billion, the world’s wealthiest person expressed his unwillingness to sell anymore shares of Tesla. Since then he has tried to end his $44 billion purchase of Twitter.

However, the social media company has sued Musk to force him stick to his commitment of $44 billion acquisition. A trial has been scheduled for October.

The move has raised many questions on Musk’s confidence of winning the battle. While many believe that despite appearing confidence through his Tweets, Musk is aware of the shaky ground beneath is feet. By acting against his strategy and wish of selling the tesla stocks, Musk has signaled that he himself is sceptical about making Twitter bite the dust in the court battle.

But there are many experts who believe otherwise as well. They sees it no less than a smart move made by Musk.

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Charu Chanana, a strategist with Saxo Capital Markets Pte, Singapore, said that Musk might be trying to cash in on Tesla shares’ rebound of 35% since May.

“The bear market rally is starting to falter and further repricing by Fed expectations could mean more pain in equities, especially in tech.”

Tesla’s rollercoaster ride on the stock market

Tesla shares rose from their recent lows, but they are still falling this year.

Tesla shares slumped soon after Musk released the Twitter acquisition offer. However, after two months of tug of war between Musk and Twitter management, the stocks started recovering again amid the possibility of cancelation of the deal.

Investors now fear that there could be adverse affect of the upcoming court battle on Tesla’s stock performance.

Many investors already sensed the mood of Musk and the market sentiments, and became sceptical about Musk’s decision to refrain from selling Tesla stock. 68% of 1,562 respondents in an MLIV Pulse poll said last month that he would likely sell more, regardless of the outcome of the Twitter deal.

Just 24 hours before offloading Tesla stocks, Musk stated at the Tesla shareholder meeting that any weakness in share price was a purchasing opportunity.

Jim Dixon, a senior equity sales trader at Mirabaud Securities, believes that shareholders must not be surprised if Musk offloads more shares in near future.

Musk previously stated that he has secured $7.1 billion in equity commitments from investors such as Sequoia Capital, Binance and Larry Ellison to fun its Twitter acquisition deal. However, his recent sale of share indicate that he is sceptical about having the backing of few equity partners, or any last minute surprise from any of them.

Musk is always known for having contingency plan ready. While is making himself prepared for the ‘force acquisition’ of Twitter, he is leaving no stone unturned to put Twitter in a fix.

Musk’s weekend tweet was about reiterating his commitment of Twitter’s acquisition. However, he didn’t forget to add that it’s only possible if the social media company provides its sampling method to determine how many bots are on its platform.

Tesla’s founder and the world’s richest person is well aware about the clause that could jeopardise his plans. A clause in the Twitter agreement stipulated that the party backing off from the deal would have to cough up $1 billion termination fees under certain circumstances. Whether Musk would be allowed to walk away from deal without paying any money citing spam and bots accounts is now a hot debate among legal experts worldwide.

Musk also polled Twitter followers asking about their views on Twitter’s claims to have having less than 5% of spam/bots accounts on the platform. Two out of every three participants didn’t show trust in Twitter’s claim.

Even after offloading Tesla’s stocks worth $32 billion in the last 10 months, Musk is still the the largest stakeholder with 14.8% stake in Tesla.

According to the Bloomberg Billionaires Index Musk’s fortune of $250.2 billion is the largest in the world. However, his wealth has decreased by approximately $20.1 billion as Tesla’s stock declined.

The shareholders of the carmaker approved a three for one stock split last Wednesday, an attempt to draw even more retail investors. The company’s second quarter earnings were better than expected. This was in addition to landmark US legislation, which includes tax credits for electric car purchases and loans to companies that build clean vehicles.

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