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Tesla Stock Sees 2nd Highest Trading Volume Fueling Speculation Elon Musk Is Once Again Selling Shares

Today was the second-highest trading volume for Tesla shares. However, despite the unusual interest in Tesla, the stock still finished down 4% for the day. This has fueled speculation that Musk is once again selling Tesla shares.

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Since Musk announced his intention to buy Twitter on April 14 for $43 billion, Tesla shares have gone down more than 50%. This means in less than a year, more than $500 billion has been wiped off Tesla’s $1 trillion market cap.

Yes, in the meantime all growth stocks have experienced a huge sell-off however, Tesla’s losses have undoubtedly been exacerbated by Musk’s Twitter deal.

There are 3 main reasons why Musk buying Twitter has caused Tesla shares to go down.

First, although Elon Musk is the richest person in the world with a net worth north of $185 billion, most of Musk’s wealth is tied up in his 17% stake in Tesla. This means, in order to raise the necessary capital to buy Twitter, Musk had to sell his Tesla shares.

And between April 26 and 29, this is exactly what happened. Although Tesla reported a record-breaking quarter several days prior, out of the blue on April 26 Tesla stock started to crash. And in the next few days, Tesla’s stock price starts to recover only to give up all the gains on the same day.

At the time, the reason Tesla’s stock price was going down was a head-scratcher for the EV maker’s investor community. However, on April 29, in a filing with the Securities and Exchange Commission, it was revealed that Elon Musk selling Tesla shares was the reason the EV maker’s stock went down by 18%.

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According to the filing, in those 3 days, Elon Musk sold 9.6 million Tesla shares to raise $8.5 billion to fund his Twitter buyout.

The second reason Musk’s Twitter deal has negatively affected Tesla shares is fears that Musk’s attention will be diverted to Twitter. Musk is one of the busiest people on earth, on top of running Tesla full-time as the CEO, the serial entrepreneur also serves as the company’s Chief Product Architect.

Musk is also the CEO of the space venture he founded, SpaceX. At SpaceX, Musk holds a significant engineering role serving as SpaceX’s Chief Technology Officer.

On top of all this, Musk is also involved in the tunneling venture he founded, The Boring Company, which recently announced it will be building a working Hyperloop.

Add to this, his involvement at his neural implant startup, Neuralink. And to put the icing on top, Musk is also a father to 7 children. By now, I assume you can see how constrained Musk’s time is.

However, despite everything he has going on Musk has now taken on the role of Twitter’s CEO, and from his tweets, it appears that Musk is deeply involved in the daily activities of the social media platform.

And finally, the third reason Musk buying Twitter has negatively affected Tesla was Musk’s (later abandoned) plan to take out a $13 billion margin loan against his Tesla shares to buy Twitter. If you happen to be unfamiliar, a margin loan basically entails using shares in a company as collateral to borrow money.

Margin loans are a creative way to increase cash holdings without having to sell shares. Basically, they allow you to have your cake and eat it too. However, the problem begins if the share price starts to tank.

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After the share price goes down by a certain amount, the person who took a margin loan will get a margin call. At this time, the debt holder will be forced to sell his/her shares to pay back the loan. And the more the person is forced to sell, the more the stock price goes down causing a downward spiral and huge losses.

To alleviate this risk, Musk entirely abandoned plans to take out Tesla backed margin loan and instead directly borrowed $13 billion to fund his Twitter purchase. Although there are new rumors suggesting that Elon Musk is reconsidering taking a Tesla-backed margin loan to pay down some of Twitter’s debt.

And this brings us back to today. Tesla stock had another bad day with shares of the EV maker down another 4%. This is despite today being the second-highest trading volume for Tesla with 176 million shares changing hands.

The only other time Tesla shares were traded more than today was back in November 2021, as it was announced the EV maker will be added to the S&P 500 index.

However, despite the strong interest in Tesla shares today, the EV maker ended the trading day down 4%. And this has fueled speculation that Musk is once again selling Tesla shares.

One such observer who shared this sentiment on Twitter is Gary Black, who is a financial analyst and Tesla investor. Black wrote on Twitter “-3% lower today against strong tape on 2x normal volume (70M shares vs normal 35M shares at 11am ET). Is Elon selling TSLA shares again at lowest ever forward P/E (29x) before the 4Q TSLA trading window closes Friday? Hard to fathom but it’s possible.”

Black’s assessment makes a lot of sense given recent rumors suggesting that Musk is looking to pay down some of Twitter’s debt, that Friday is the last day Musk is permitted to sell Tesla shares until next year, and that the stock went down despite having its second highest trading volume.

Looking from the outside, it certainly looks like Musk is once again selling Tesla shares but currently, there is no concrete evidence to say one way or the other.

However, if Musk is indeed selling Tesla shares, then he will have to declare it to regulators in the next few days. And we will be sure to keep you posted when we learn more about the situation.

Until then, make sure to visit our site regularly for the latest news.

Image: Courtesy of Tesla

For more information check out: Tesla Patents Dual Axis Rotation For Center Screen

Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.

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DeanMcManis (not verified)    December 14, 2022 - 3:58PM

More likely it is driven by Tesla stock short sellers. Tesla is one of the most shorted stocks, and has been for many years. Every time I read bad (or "could be bad") Tesla news reported online, I figure that it is a false story (or a mostly false story with some small basis in fact) specifically designed to have the value of Tesla stock drop. I don't worry personally because I don't own any Tesla stock, but I do cringe a bit because I see zero positive value in short selling stocks.