Recently, Elon Musk sold another $3.6 billion worth of Tesla shares for unknown reasons. Musk was able to pay for his acquisition of Twitter using money he had made from selling Tesla shares earlier in 2022. This transaction raises the issue of whether or not Musk will continue to sell further shares of Tesla stock despite his repeated public promises to cease. What follows is information that should be of interest to investors.
Why is Musk Selling Tesla Stock?
In April 2022, Elon Musk started selling massive amounts of Tesla shares to fund his acquisition of Twitter. For a total of $22.9 billion, he first sold $8.5 billion in shares in April, then $6.9 billion in August 2022, $3.95 billion in November, and $3.6 billion in December.
Since much of Mr. Musk’s wealth is invested in Tesla stock, he had to liquidate some of it in order to finance his acquisition of the social media business Twitter. Mr. Musk has been selling off additional TSLA shares since after the Twitter transaction concluded in late October 2022. It is unclear why he sold shares in December, but he says he won’t sell again for at least a year and a half.
The value of a share of Tesla stock is down 60% in 2022 as of this writing. Shareholders’ concerns that Musk is spending too much time on Twitter, concerns about a possible economic downturn in 2023, temporary halts in Tesla’s manufacturing, and Musk selling about $22.9 billion in shares are all contributing reasons.
Will There be More Selling of Tesla Stock?
It’s tough to guess what Mr. Musk will do with his remaining Tesla shares. Throughout the year 2022, he made it clear that he had no intention of selling any more of his shares. In August, 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.”
Mr. Musk reiterated that he would not be selling any further shares of stock after his sell-off in December 2022, stating, “I don’t know, but it will probably be at least two years before I sell any stock. Not even close to happening next year, and probably not the year after that either “.
These actions show that Mr. Musk cannot be trusted as CEO of Tesla, which makes it impossible for shareholders to put their confidence in him. Mr. Musk’s activities are causing a decline in share price because investors no longer have faith in the way the firm is being managed.
Another problem is that Mr. Musk has been selling off big amounts of his shares, which usually indicates that the CEO isn’t happy with the company’s performance and is eager to cash out. While it’s possible that Tesla is an exception, in general CEOs have access to information that shareholders do not, and shareholders may see the use of the funds to settle Twitter’s debt as a convenient alibi.
A drop in Tesla’s stock price may discourage Mr. Musk from selling more of his holdings, but it doesn’t mean he’ll start acting responsibly again. He presently attributes the stock market decline to the Federal Reserve’s decision to raise the federal funds rate, among other macroeconomic variables.
In recent days, Elon Musk has sold another $3.6 billion worth of Tesla stock. Musk bought Twitter using money he had gained from selling Tesla stock earlier in 2022.
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