Electric vehicle giant Tesla Inc TSLA reported third-quarter financial results this week. With earnings in the rearview mirror, the stock could be under short-term pressure with a new trading window open for CEO Elon Musk.
What Happened: A deal for Musk to acquire social media platform Twitter Inc TWTR is back on with a pending price of $44 billion. To finance the deal, Musk has lined up several backers and also previously sold a portion of his stake in Tesla to raise the necessary funds.
Musk was not allowed to sell shares of Tesla between the period after the third quarter ended and the company reported the results. With that now behind him, a window to sell shares to finance the Twitter deal is likely open.
“$TSLA trading window likely reopens Friday,” The Future Fund Managing Partner Gary Black said. “With Elon selling hard on last night’s call, I continue to expect Elon to sell around $5 billion Tesla shares to close Twitter deal by next Friday.”
Black previously estimated that $5.4 billion was still needed by Musk to fund the deal, likely coming from the sale of Tesla shares.
One idea thrown out by Black was a potential share buyback by Tesla.
“We asked a securities lawyer if $TSLA could authorize and announce a $10B multi-year share buyback and then use $5B to immediately buy back shares from Elon Musk.”
Black said the answer appeared to be yes.
On its earnings call, Musk said Tesla could consider doing a share buyback, one of several items that were seen as positives for the company going forward.
Some observers said Musk was overly promotional of Tesla as a company during the earnings call ahead of a potential sale of shares.
“Wow I’ve never heard Elon pump Tesla this much,” Tesla blogger Sawyer Merritt tweeted.
Tesla announced it would begin deliveries of the Tesla Semi in December. Musk also shared more details of a $25,000 robotaxi, which is seen as a major future catalyst. The Tesla CEO also said that Tesla could be worth more than Apple Inc AAPL and Saudi Aramco, the two most valuable companies in the world, combined.
The comments and new catalysts presented by Musk could be a means to try and provide a boost to Tesla shares, which could come ahead of a planned partial sale of stock by the CEO.
Related Link: Elon Musk Plans To Gut Twitter Workforce
Why It’s Important: The pending acquisition of Twitter by Musk has been an overhang for Tesla and potentially kept investors on the sidelines until they know Musk is done selling and has completed the acquisition.
“Once TWTR overhang lifts, TSLA could rise 5-10%,” Black said.
The Twitter deal could close by Oct. 28, leaving a small period of time for Musk to sell shares after earnings and before the deal closes. The sale will likely not be made public for several weeks, which means a filing could come after the Twitter deal closes.
Musk last sold shares of Tesla in August, something done by the CEO to help fund the Twitter acquisition.
“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” Musk tweeted.
Musk had 155,039,144 shares of Tesla after the August sale, giving him 14.9% ownership of the company. The stake did not include any unlocked options that are part of a compensation package for Musk.
After a three-for-one split, Musk now has 465,117,432 shares of Tesla.
TSLA Price Action: Tesla shares were trading 1.82% higher to $211.06 on Friday. Shares of Tesla are down 48% year-to-date in 2022.
Photo courtesy of Tesla.
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