Elon Musk Sold Billions Of Tesla Stock To Buy Twitter

It seems Elon Musk has made the deal to buy Twitter, but it’s starting to become aware of just how much it cost him.

In early April, the SpaceX founder became Twitter’s largest shareholder in the company. Although he was offered to take a seat on the board of directors in exchange not to buy more than 14.9% of the company, Musk rejected the offer. He texted Twitter’s board chair Bret Taylor, offering to buy Twitter for $54.20 per share. Although Twitter adopted what was known as the “poison pill” defense, the board ultimately made a deal to buy Twitter from Musk in exchange for $44 billion.

However, it looks like the Tesla CEO had to sell a lot of shares to do it.

According to CNN, Musk had to sell $8.5 billion dollars of Tesla’s shares three days after Twitter decided to sell him the company. He sold 3.7 million shares on Tuesday for $3.3 billion. On Wednesday, he sold 735,000 shares for $654 million. The transactions were filed with the Securities and Exchange Commission on Thursday.

On Friday morning, Musk disclosed that he had sold an extra 5.2 million shares for $4.5 billion dollars. The average price of each share was reportedly around $883.09 dollars. However, it’s also said that the sales only represent about 5.6% of his total shares and less than 4% if you’re including stock options.

The SEC filing does not include a reason for the sale, but it seems clear that Musk is trying to scrape up the funds to afford the $44 billion to buy the social media company. On Thursday night, Musk tweeted, “No further TSLA sales planned after today.”

“For now,” wrote one user.

Gene Munster, a managing partner of Loup Ventures, told the publication, “How much he’s going to have to sell now appears to be known. That’s the reason for the bounce in stock. I actually thought he’d have to sell more shares than this.”

It remains to be seen what Tesla investors will do, now that Musk seems to be diverting most of his time and attention to Twitter.

Dan Ives, a tech analyst with Wedbush Securities, said, “Besides the distraction issues, it brings the circus-like situation back into a Tesla story that has nothing to do with Tesla. The uncertainty about the Twitter deal -- shares are trading about 8% below the agreed-upon purchase price -- only adds to the uncertainty for what Musk will do with his Tesla shares.”

“He says it's the end and that makes me believe it likely is,” Ives added. “But the Street will be watching closely to see if it truly is the end.”

It’s not necessary for Musk to sell all of his shares in order to fund the purchase. He will also be able to use his shares as collateral for loans to raise the money. However, that will only get him so far. According to CNN, Tesla corporate rules state that officers and directors of the company are only allowed to raise 25% of the value of the stock being pledged as collateral.

As of June 30, 2021, company filings show that Musk has already pledged 88.3 million of his Tesla shares as collateral; however, those shares were pledged years ago, when Tesla shares were not worth as much as they are now. Even with the recent decline in Tesla’s sale price, though, his estimated 67 million unpledged shares could still be used to borrow at least $17 billion dollars.

However, Munster doesn’t believe that Musk will go up to the maximum, at least, not right now. He noted that it’s “a pretty volatile stock. It’s up 10 times in value in just the past few years. Those stocks can go back down.”