Elon Musk Tests Tesla Bulls’ Faith With $40 Billion In Share Sales

No longer the world’s richest man, Tesla CEO Elon Musk continues to cut his stake in the world’s most-valuable carmaker.

Tesla  (TSLA) – Get Free Report shares extended declines Thursday following yet another share sale from CEO Elon Musk amid the biggest peak-to-trough decline on record for the world’s biggest carmaker.

Musk sold another 22 million shares this week, Securities and Exchange Commission filings indicated Thursday, raising around $3.6 billion and lifting his year-to-date sale total to around $40 billion. 

Earlier this summer, Musk sold 7.92 million shares between August 5 and August 9, netting a total of around $6.9 billion, taking advantage of a 47% rally in Tesla shares from late May to August 5, when the first sale was made. He sold another $8.5 billion in April. Musk now holds a 13.4% stake in Tesla, down from around 17% this time last year.

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Musk’s efforts to stamp his authority on Twitter, the social media group he purchased in October for around $44 billion, has come at a significant cost to Tesla investors: shares in the carmaker are down more than 60% since Musk made his intention to buy the group public in early April.

Bloomberg reported earlier this month that Musk may need to provide margin loans to a group of bankers lead by Morgan Stanley as a way to replace the existing high-rate paper he arranged to fund the purchase earlier this year, given that debt servicing costs forecast for 2023 are likely to be much higher than the social media platform’s projected earnings.

Musk borrowed around $13 billion from the banking group that included a $3 billion chunk of unsecured debt that carries and annual interest rate of 11.75%, Bloomberg reported. The rest of the debt package is comprised of $6.5 billion in term loans and $3 billion in secured bonds.

Tesla shares were marked 2.55% lower in pre-market trading to indicate an opening bell price of $152.80 each, the lowest level in more than two years and a move that extends the stock’s year-to-date decline to around 56.6%. 

Short interest in Tesla shares remains elevated, as well, with bets around the group pegged at around $11.9 billion, according to recent data from S3 Partners, a figure that represents around 2.65% of the group’s outstanding shares.

Beyond Musk’s Twitter distractions, Tesla also faces headwinds from weakening demand in China, where the economy continues to suffer from its ongoing Covid crisis. 

China’s recent loosening of Covid restrictions is expected to boost growth in 2023, but the damage from its draconian policies has left a lasting scar on the world’s second-largest economy, with data today indicating a second consecutive contraction in factory gate prices over the month of November, following on from the biggest year-on-year decline in exports in nearly three years. 

Reuters reported last week that Tesla will suspend China-based production of its Model Y sedan over the final week of the year, beginning on December 25, in a move that will ultimately reduce output of the sedan by around 30% from November levels.

The report follows shortly on the heels of a move by Tesla to offer further discounts to China-based buyers of its Model 3 and Model Y sedans, provided the purchase is completed by the end of the year, adding to price cuts unveiled in October. 

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