In the last few days, Tesla shares went down by as much as 18%. Now, we learned the reason Tesla shares were going down was that Elon Musk sold 4.4 million shares to raise $4 billion. This is not the total amount of Musk's sell but, the Tesla CEO says he is done selling, at least for now.
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Tesla recently posted a record-breaking quarter. In the Q1 2022 earnings report released on April 20, Tesla proved that the company can produce EVs much more profitably than even internal combustion vehicles which have had 100 years of production to mature.
Tesla said it achieved an automotive gross margin of 32.9% and even more impressively the EV maker also announced that its operating gross margin has grown to 19.2%.
This not only disproved the age-old criticism that “Tesla can sell EVs but can’t do so profitably” but also showed currently Teslas are the most profitable vehicles of any large auto OEM and by a significant margin.
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Given this amazing news, it was a bit of a head-scratcher when Tesla stock fell by as much as 18% in the last couple of days. There were several speculations put forward to make sense of the Tesla crash.
The main theory was that short sellers were behind the crash. You see, on April 25 Elon Musk reached a deal with Twitter’s board to buy the social media platform. According to the deal, Musk will need to raise a further $21 billion to take Twitter private.
Knowing this, it was speculated that short sellers were initiating a large short position in Tesla in anticipation Musk will raise the $21 billion he needs to take Twitter private by selling his Tesla stock.
The speculations were almost correct but, with one enormous caveat. Yes, someone was selling a lot of Tesla shares but, the person behind the sales was the Tesla CEO himself, Elon Musk.
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According to a filing with the Securities and Exchange Commission, between April 26 and 27, Elon Musk sold 4.4 million Tesla shares to raise $4 billion. Musk also confirmed he sold Tesla shares on April 28, however, we are yet to find out the amount and might not do so until Monday, May 2.
This news finally settles why Tesla shares went down by as much as 18% the past few days. However, this is little solace for some Tesla investors who got margin calls since they took out leverage to buy Tesla.
Nevertheless, on the bright side Musk announced today that he is done selling by writing on Twitter that he has “no further TSLA sales planned after today”. This should calm the nerves of Tesla investors startled by the wild price swing.
However, if you read Musk’s wording carefully he said that ‘he doesn’t have any more planned sales of Tesla shares’ however, Musk did not definitely commit to no longer selling Tesla shares.
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Musk raised $4 billion from the Tesla stock sale on April 26 and 27, and we still don’t know how much he was able to raise on April 28, however, unless Musk sold $17 billion worth of Tesla shares on Thursday, there is still a chance he might need to sell more shares to come up with the further $21 billion he needs to rise to purchase Twitter.
Yes, Musk definitely doesn’t need to raise the entire $21 billion on his own and has said he plans to have as many as 2000 investors go in with him on his Twitter deal. And if some big names like Vanguard, which owns 10% of Twitter agree to go in with Musk, the Tesla CEO will definitely not need to sell more shares.
However, as the signatory to the deal, if Musk can’t persuade other investors to join in with him in his Twitter buyout then sadly he will likely be forced to sell even more shares.
Having said that, we are still happy to see Musk is done selling Tesla shares, at least even if it is just for now. And we will be sure to keep you posted if the Tesla CEO is forced to sell more shares in the future. Until then make sure to visit our site torquenews.com/Tesla regularly for the latest updates.
So what do you think? Surprised to find out Elon Musk’s sale was why Tesla’s stock price was crashing the past few days? Also, do you think Musk will need to sell even more of his Tesla shares to fund his Twitter buyout? Let me know your thoughts in the comments below.
Image: Courtesy of Tesla
For more information check out: Elon Musk Places His New Tesla Battery Bet
Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.
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