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Elon Musk sells $4 billion in Tesla shares: what are the reasons?

Elon Musk sold millions of Tesla stocks last week to ensure he has enough cash on hand to purchase Twitter. What has been the impact?

Elon Musk sold millions of Tesla stocks last week to ensure he has enough cash on hand to purchase Twitter. What has been the impact?
Joe SkipperREUTERS

To prepare for his purchase of Twitter, Elon Musk has sold over $4 billion in Tesla stock. Much of Musk’s wealth is held in stocks and other assets, meaning that to buy the platform, he needs to make some of those liquid.

The IRS will tax about $1 billion of the revanue generated from the sale, leaving Musk with around $3 billion. Some experts have noted that Musk made around $3 billion last year by selling Tesla stock, which still leaves a him around $21 billion short of what he will need to hand over to Twitter to make the purchase final. Musk has two main options: sell part of his stake in SpaceX or find an equity partner.

How has this impacted the value of Tesla?

Last week, Elon Musk sold nearly 4.21 million shares, and since the sale, Tesla stock has decreased by more than nineteen percent in value compared to last month. The drop equates to a loss of around $35 billion in Tesla’s worth since his intentions to purchase Twitter was made public.

The soon-to-be owner of Twitter took to the platform to report on 29 April that no more stocks would be sold on Thursday.

Related: Elon Musk fears for life after Russian threat

However, selling more of his stock is not really an option for Musk. Much of the remaining 168 million stocks in the company he owns are primarily used as collateral for corporate loans taken out by the company.

Investors begin to worry about the company’s value

Musk’s rush to sell has many investors worried as it comes after the news that more than two million Tesla vehicles have been recalled this year. These recalls had already taken a serious toll on the company’s value.

2022 Tesla recalls impact two million cars

Some of the recalls the company has described as “proactive,” while others deal with software updates that could lead to a driver being more likely to have an accident.

On 18 April, the Department of Transportation reported that around 48,000 Telsa Model 3s would be recalled because the “unit of speed (mph or km/h) may fail to display on the speedometer while in Track Mode.” When acknowleging this specific recall to the federal government, Tesla said that the issues with Track Mode could not allow the driver to know how “fast the vehicle is traveling” as they will not be able to see the “mph or km/h unit display” which could increase “the risk of a crash.”