Elon Musk's Tesla Stock Sale May Be Scary But Is Overhang Finally Lifted? Analysts React

Zinger Key Points
  • Tesla CEO Elon Musk reneged on his word and sold more shares in his electric vehicle company.
  • Analysts are divided: While some suggest it could be to foot M&A bill, others think it is for meeting Twitter's running expenditure.
Elon Musk's Tesla Stock Sale May Be Scary But Is Overhang Finally Lifted? Analysts React

Elon Musk sold about $4 billion worth of Tesla Inc. TSLA shares since Friday, and the news will likely weigh down on the beaten-down stock.

Advertisers’ Pause Catch Musk Unawares, Says Munster: The recent disposals represent about 3% of Musk’s holdings, Loup FundsGene Munster said. “Looks like he’s preparing for Twitter to be a money hole for the next year,” Munster added.

The selling, according to the venture capitalist, is not a sign of his confidence in Tesla. The news may not sit well with some investors, he added.

See Also: Elon Musk's $44B Twitter Deal A 'Small Price,' Says Raoul Pal — It Could Unlock Real Value For This Key Tesla Product

Munster said investors do care about fundamentals and may have to wait until Jan. 2 to get a read on the December quarter.

Musk may have thought he was done selling but Twitter advertisers have paused more quickly than he expected, the Loup Funds co-founder said. The Tesla CEO may be factoring in more advertisers pausing once content moderation policies are updated, Munster said, adding that more pausing will lead to more losses.

Frustrating But Worries Should Be Done For Now, Says Ives: The Twitter deal continues to be an albatross in many ways, Wedbush analyst Daniel Ives said, commenting on the transaction.

It looks like the Musk stock sale worries should be done, he added.

While noting that Tesla stock is down since the Twitter deal, he said it’s a “frustrating situation” for all.

All the same, the analyst maintained an Outperform rating and a $300 price target for Tesla shares.

Twitter Doesn’t Need Cash, Black Says: The $3.9 billion sales proceeds from the nearly 20 million shares Musk disposed of on Friday, Monday and Tuesday will likely be used to pay back any bridge loan needed to close the deal, Future Fund’s Gary Black said.

Given that Musk raised private equity financing as well, it’s possible he is done with selling, the fund manager said. He doubted that the selling is to finance Twitter’s cash burn.

Black also noted that he previously estimated that an incremental $5.4 billion worth of Tesla stock sales may be warranted despite Musk saying in August that he was done selling.

As of June 30, Twitter had $6.1 billion in cash, and for the first two quarters of 2022, the company generated ad revenue of $2.2 billion in advertising revenue and $0.2 million in subscription fees, the fund manager said.

“Assuming TWTR can offset the loss in Adv revs with $400M cost cuts and new $8/mo blue check fees, TWTR doesn’t need cash,” Black said.

Price Action: Tesla shares closed Tuesday’s session down 2.93% at $191.30, according to Benzinga Pro data.

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