Tesla shares rise after Elon Musk’s $5B US stock sale

By November 10, 2021 No Comments

Tesla shares rose in U.S. premarket trading on Thursday, even after overnight filings showed chief executive and top holder Elon Musk had sold about $5 billion US of the stock over recent days.

The electric-car maker’s shares climbed 2.4 per cent to $1,093.65 US, recouping some of the heavy losses suffered earlier in the week, during the period when Musk had sold. 

Musk’s share sale was his first since 2016 and followed his weekend poll of Twitter users about offloading 10 per cent of his Tesla stake, which comprises most of his estimated $281 billion US fortune.

Investors downplayed the significance of Musk’s trading for the stock’s outlook, pointing instead to strong car orders and Musk’s professed faith in the company, though brokers said it could be a bumpy day in U.S. trade.

“The reason that we’re seeing stock rebound is because there does seem to be method in his madness,” AJ Bell analyst Danni Hewson said.

“It’s about making sure that the market understands this isn’t something done on a whim, or because his Twitter followers told him he should. He’s had his decision already made, rubber stamped.”

Filings showed Musk’s trust sold nearly 3.6 million shares in Tesla, worth around $4 billion US, while he also sold another 934,000 shares for $1.1 billion US to cover tax obligations after exercising options to acquire nearly 2.2 million shares.

The sale equates to about three per cent of Musk’s total holdings. The options-related part of the sale was put in place in September, much before his weekend Twitter poll.

“All I really see this doing is providing some short-term volatility and medium term keeping Tesla shares’ valuation multiples sky high as long as Elon remains in the spotlight and investors continue to see him as an ‘exceptional visionary,'” said Tariq Dennison, managing director at GFM Asset Management in Hong Kong, who is net short on Tesla stock.

Tesla did not respond to a request for comment.

Retail mania

While Tesla has lost more in market value than the entire market capitalization of Ford Motor Co. this week, retail investors have been net buyers, making net purchases of $157 million US on Monday and Tuesday, according to Vanda Research.

Confirmation of Musk as a seller, however, and the prospect of more sales to come might weigh on the price in the near-term.

“It will definitely spook some retail traders,” said Oriano Lizza, premium sales trader at brokerage CMC Markets in Singapore.

“Some people will be tightening stops or looking to close out. Though [Musk] will want to protect the stock to some extent and won’t want people running for the door.”

Four former and current Tesla board members, including Musk’s brother Kimbal Musk, have filed to sell nearly $1 billion US worth of shares since Tesla’s market value surpassed $1 trillion US late last month, according to filings and market data.

The company’s share price has made staggering gains over recent years and has epitomized the ebullient mood in U.S. markets and the optimism of small-time traders who have helped drive it up 51 per cent this year and 1,300 per cent from 2020 lows.