Elon Musk sells Tesla shares for $ 8.5 billion

Musk sold 3.7 million shares of Tesla shares on Tuesday, for a total of $ 3.3 billion, and another 735,000 shares on Wednesday, bringing in $ 654 million, according to records he submitted to the Securities and Exchange Commission late Thursday.

On Friday morning, he revealed that he had sold another 5.2 million shares for a total of 4.5 billion dollars. Overall, he received an average price of $ 883.09 per share.

The sales represent only 5.6% of the Tesla shares he held directly at the start of the day on Tuesday, and less than 4% of his total holding of Tesla if the stock options he controls are included.

The registrations do not reveal the reason for the sale, but Musk seems to be raising money to buy Twitter.

In a chirping Thursday night, after the first submissions, but before the revelation of Thursday’s sale, Musk said, “No further TSLA sales are scheduled for today.”

Corporate insiders, such as Musk, must report the purchase or sale of the company’s shares to the SEC to inform the broader investment community about their activity. But they have a couple of days to make that submission and still abide by the rules.

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Musk’s sale of Tesla shares was large enough to lower the company’s share price. The 3.7 million shares sold on Tuesday represented 17% of the normal daily trading value of Tesla shares so far this year before Tuesday. Tesla shares lost 12.2% of their value during trading on Tuesday, the biggest one-day fall in the company’s shares since September 2020. The stock’s decline led to a sell-off from other investors, as 45 million shares traded by hand – about twice the volume of trades from the day before.

Tesla investors could also have sold shares this week out of concern that Musk would not be able to give that much time and attention to Tesla. The company has ambitious growth plans and increasing competition.

Shares in Tesla hardly changed on Wednesday and Thursday. The stock rose 5% in morning trading on Friday, when his tweet apparently assured investors that his sale was complete.

Musk is expected to use its huge Tesla holdings as a way to fund the purchase of Twitter. But that does not 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 cash.

But there are limits to how much money he can raise by providing Tesla shares as collateral. He can raise more money by selling part of his Tesla shares. Tesla’s company rules state that managers and directors in the company can raise only 25% of the value of the share provided as security.

From 30 June 2021, company registrations show that Musk already pledged 88.3 million of its Tesla shares as collateral, but these shares were pledged many years ago when the Tesla shares were worth a small fraction of their current value. He would probably be able to borrow more money himself against some of these shares. And the estimated 79 million unsecured shares he owns after Tuesday’s sale could be used to borrow $ 17 billion, even with the recent decline in Tesla shares.

Correction: An earlier version of this story failed the original number of Tesla shares Elon Musk sold, 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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