Tesla falls as Twitter users back Musk selling $21 bn stake
NEW YORK: Tesla Inc. declined after Elon Musk’s Twitter followers voted in favor of selling 10% of his stake in a poll set up by the electric-car chief.
A majority of 3.5 million Twitter users—58%—said they’d support such a sale in a Twitter poll that Musk ran during the weekend. The stake would be valued at about $21 billion based on 170.5 million Tesla shares he holds.
“I was prepared to accept either outcome,” Musk said in a tweet after the poll closed.
Tesla fell as much as 7.2% in pre-market trading compared with Friday’s close of $1,222 in New York, tracking an earlier indication from Germany’s Tradegate.
The crowd-sourcing exercise is the latest example of Musk’s long history of using Twitter and his legions of fans on the platform to stoke interest in his company, sometimes pushing the envelope with tongue-in-cheek tweets. The world’s richest person proposed the move in a tweet citing recent discussions about the ultra-wealthy hoarding unrealized gains to avoid paying taxes. Musk doesn’t take a salary, but has to pay taxes on any stock options that he exercises.
Musk’s tweets have moved Tesla shares in the past, sometimes drawing the ire of authorities. Musk in 2018 agreed to get approval from a Tesla attorney prior to communicating material information to investors as part of a settlement with U.S. securities regulators. It wasn’t clear whether that official previewed Musk’s Twitter poll.
While large sales by insiders are often seen as a negative signal, a sale of this size won’t alter Tesla’s story in a meaningful way, said Dan Ives, an analyst at Wedbush Securities. Demand remains high for Tesla shares among both institutional and retail investors, he said. The unorthodox step of getting buy-in from fans and investors via a poll may also ease any concerns.
“Selling 10% is probably going to add 1.5% to 2% to the float, so it doesn’t really significantly move the needle,” Ives said in a phone interview. “I do believe that him doing it in this way definitely would soften the blow and would help the perception as well.”
The automaker’s stock has soared 73% this year to $1,222.09 as of November 5, giving it a valuation of $1.2 trillion. The number of shares that Musk—its chief executive officer and largest shareholder—could be set to offload is equivalent to 80% of Tesla’s average daily trading volume in the past three months. The amount of stock he may potentially sell would be even greater if his options are included.
Tesla’s stock won’t officially begin trading again until the early morning hours of Monday in the US.
Musk’s fortune stands at $338 billion, according to the Bloomberg Billionaires Index. About one-quarter of that consists of Tesla stock options that he’s free to exercise at any time. The securities come from two big awards he received in 2012 and 2018. The older contracts expire in August next year.
If he exercised all of the options now and immediately sold the shares, they would net him $95.9 billion before taxes.
Musk may be signaling that he wants liquidity beyond the cash he’s secured by borrowing against his holdings in the EV maker.