(Bloomberg) — Elon Musk unloaded $6.9 billion worth of shares in Tesla Inc., saying he wants to avoid a sudden sale in case he is forced to go ahead with his deal to acquire Twitter Inc.
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Tesla’s CEO sold about 7.92 million shares on Aug. 5, according to regulatory filings released after U.S. markets closed Tuesday. Musk tweeted that he was done with the sale and would buy stock in the electric car maker if the Twitter deal didn’t close.
“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners do not materialize, it is important to avoid a rush to sell Tesla stock,” Musk wrote.
Tesla climbed 3.4% to $879 before the start of regular trading on Wednesday, while Twitter jumped 4.3% to $44.69.
Musk has already dumped about $32 billion worth of Tesla stock since November. The world’s richest man said less than four months ago that he had no more stock sales planned and has since been trying to pull off his $44 billion acquisition of Twitter. The social media company has filed a lawsuit to force Musk to go through with the deal, and a trial is scheduled for October.
“He’s making money for Twitter,” said Charu Chanana, a strategist at Saxo Capital Markets Pte in Singapore, who believes Musk may be trying to take advantage of Tesla’s stock rally, which has risen about 35 percent since late May. “The bear market rally has begun to wind down, and further reassessment of Fed expectations could mean more pain for stocks ahead, especially in tech.”
Investors were skeptical that Musk, 51, was done unloading Tesla stock, with 68% of 1,562 respondents to an MLIV Pulse survey last month saying he was likely to sell more regardless of what happens with the Twitter deal.
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“Musk said at Tesla’s shareholder meeting that any weakness in the stock price is a buying opportunity, then 24 hours later he started selling shares himself,” said Jim Dixon, senior equity trader at Mirabaud Securities. It’s “highly unlikely” Musk is done unloading the stock now, Dixon said.
Musk can keep selling Tesla, with or without Twitter: MLIV Pulse
Tesla’s market fortunes have been tied to the Twitter deal since Musk made his surprise offers in April. The automaker’s shares initially fell on concerns that the pursuit would distract it and on the risk of a margin loan it intended to take out against its Tesla stake. The stock rose when Musk abandoned the borrowing plan and in the weeks after he said he wanted to end the deal.
When Musk abandoned plans to partially finance the Twitter purchase with a margin loan from Tesla, it increased the size of the equity component of the deal to $33.5 billion. It previously announced that it had secured $7.1 billion in capital commitments from investors including billionaire Larry Ellison, Sequoia Capital and Binance.
Over the weekend, Musk tweeted that if Twitter provided its account sampling method to determine the number of bots on its platform, “the deal should go ahead on the original terms.”
The Twitter deal included a provision that if it fell apart, the party in breach would pay a $1 billion termination fee under certain circumstances. Legal experts debated whether the conflict over spam bots was enough to allow Musk to back out of the deal.
Musk’s disposal of Tesla stock over the past 10 months began after he polled Twitter users about whether he should reduce his stake. He still owns about 14.8 percent of the company and remains the largest shareholder, according to data compiled by Bloomberg.
Commenting before Musk’s tweets clarifying the reason for the sale, Gene Munster, managing partner of Loup Ventures, said he estimated the odds of the billionaire buying Twitter at 75 percent.
“I’m shocked,” Munster said. “This will be a headwind for Tesla in the near term. In the long run, all that matters is deliveries and gross profit.”
Musk’s $250.2 billion fortune is the largest in the world, according to the Bloomberg Billionaires Index, although his fortune has shrunk by about $20.1 billion this year as Tesla’s stock has slumped.
The automaker’s shareholders approved a three-for-one stock split last week, a move designed to attract even more retail investors. Tesla’s better-than-expected second-quarter earnings were a tailwind, along with landmark U.S. legislation that includes tax credits for electric car purchases and loans for companies that build factories that make clean vehicles.
(Updates with early trading in the fourth paragraph.)
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