Elon Musk cashes in $6.9 billion of Tesla stock, just in case

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Within weeks of the Twitter board’s approval of Elon Musk’s unsolicited bid to take the company private, the South African-born billionaire came down with a severe case of buyer’s remorse. Twitter was not happy, and after Musk decided not to go through with the purchase, the social media company quickly sued him. In advance of the trial, set for October despite Musk’s attempts to push it back to 2023, Elon Musk is apparently preparing for the worst-case scenario of being forced to consummate the deal.

With Tesla stock on a rebound, Musk has just sold $6.9 billion worth of shares in his electric car company, a move disclosed in regulatory filings on Tuesday. Musk got an average of $869 for the shares, which is significantly more than the $628 that TSLA shares were trading at in late May. TSLA had hit its 2022 peak of $1,145 on April 4, the day after Musk revealed his purchase of 9.2 percent of Twitter’s outstanding shares.

In late April, after announcing his plans to buy Twitter, Musk unloaded $8.5 billion in Tesla stock, saying at the time that there were “no further TSLA sales planned after today.”

Although he has some financing lined up, the share of the sale price that Musk is personally responsible for could be north of $33 billion. As Twitter noted in its lawsuit, “The other terms Musk offered and agreed to were, as he touted, ‘seller friendly.’ There is no financing contingency and no diligence condition,” the complaint said. “The deal is backed by airtight debt and equity commitments. Musk has personally committed $33.5 billion.”

By selling TSLA now, when the stock has rebounded from its May nadir, Musk avoids an emergency sale of Tesla stock—possibly at a lower price—in case the Delaware court forces the transaction to go through. While there is a $1 billion breakup fee in the purchase agreement, getting out of the deal requires more than deep regret on Musk’s part. There needs to be a “material adverse event” at Twitter or a finding that Musk was materially misled about the social media platform’s business. Musk is taking that second route, arguing that Twitter is so plagued by spam bots that his finance people cannot possibly accurately evaluate Twitter’s business prospects.

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