Tesla Stock Falls After Elon Musk’s Latest Tweets Signal He’ll Be Selling Shares

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This isn’t the first time Elon Musk has made a splash on Twitter.


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Tesla

stock was falling Monday as investors reacted to Elon Musk’s latest postings on Twitter, where signs pointed to the CEO of the electric-vehicle maker imminently selling 10% of his stake in the company.

Tesla (ticker: TSLA) was down 4.3% in premarket trading in the U.S., with the company’s Frankfurt-listed shares (TL0.Germany) down 5.9% after opening 9% lower.

Musk asked his 62.8 million Twitter followers this weekend if he should sell 10% of his Tesla stock, promising to abide by the results of the poll. Almost 58% of the more than 3.5 million respondents to the Twitter poll voted for him to sell.

The billionaire Tesla CEO is considered the world’s richest person by virtue of his holdings in the EV company, which has seen its share price soar 190% over the last year and some 3,100% over the past five years. 

Musk framed the Twitter poll in the context of a debate over whether the richest Americans were paying their fair share of taxes. Congress had considered taxing billionaires’ unrealized investment gains as a way to address the issue, but dropped the idea.

“The only way for me to pay taxes personally is to sell stock,” Musk said on Twitter, noting that he doesn’t receive a cash salary or bonus for his corporate roles, at Tesla as well as at aerospace company SpaceX.

Russ Mould, an analyst at broker AJ Bell, said Monday that the Twitter poll “effectively signals that he is going to dump stock on the market. In technical terms this is known as a share overhang, and it is something that would typically force the share price down.”

“He is so rich that he probably doesn’t care if his actions cause the Tesla price to fall a bit,” Mould added. “However, he also has a duty to act in shareholders’ interests which he hasn’t done in this situation because the incident has already destabilized the company’s valuation.”

But the analyst also noted that Tesla’s share price potentially hasn’t fallen as much as one might expect—and that could be because investors are taking Musk’s comments with a pinch of salt. The high-profile CEO has made bold statements on Twitter in the past which have later been reversed—like saying Tesla would take Bitcoin as payment, before backtracking on the plan.

Even as Tesla stock slipped back, some analysts took the opportunity to double down on a bullish stance.

Dan Ives, an analyst at Wedbush, reiterated his Outperform rating on Tesla Sunday and raised the bull case for the stock to $1,800 from $1,500, driven by accelerated electric-vehicle demand in 2022. Wedbush has a 12-month price target on Tesla stock of $1,100.

“The underlying growth story for EV demand skyrocketing globally is the key fundamental driver for Musk & Co. into 2022,” Ives said. The analyst said strong margin growth reported in Tesla’s latest quarterly earnings and a deal to supply vehicles to rental car company Hertz represented “fundamental changes” to the company’s story.

“The linchpin to the overall bull thesis on Tesla remains China, which we estimate will represent 40% of deliveries for the EV maker in 2022,” Ives said. “We estimate the China story is worth $300 per share to the Tesla story for 2022.”

The team at Wedbush added that the electric-vehicle component of President Joe Biden’s infrastructure plan buoys the EV adoption curve in the U.S.

“We believe it’s not a matter of IF, but instead how quick the EV green tidal wave hits globally with our expectation that 10% of autos will be EV by 2025 and 25% by 2030 up from a mere 3% today,” Ives said.

In a note Monday, Ives added that the indications that Musk would sell 10% of his stake in Tesla represented a higher amount than Wall Street expected him to liquidate, but remained “a digestible number” that he wasn’t worried about.

“We would rather Musk rip the band-aid off now and sell this portion of stock rather than it lingering over the next year and feeding into any non-fundamental bear thesis on the story,” Ives wrote.

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