Tesla Inc (NASDAQ: TSLA) shareholders woke up (well, in Australia) to some interesting news this morning. Tesla's totemic CEO Elon Musk has been selling shares.
The Tesla stock price had a rough night of trading last night (our time). The electric vehicle and battery manufacturer ended up dropping by a hefty 2.44% and closed at US$850 a share. It was only last week that the company hit a three-month high of $925 or so.
That means Tesla shares have now fallen 8.2% since Thursday last week. Saying that though, the company is still up almost 21% over the past month.
But many investors might be a little perturbed to find out that Musk has been selling shares in the company he helms. Regulatory filings with the US Securities and Exchange Commission (SEC) show that Musk offloaded dozens of tranches of Tesla shares between 5 August and 9 August.
All up, Musk ended up selling around US$7 billion worth of the company's shares. These sales were executed at share prices ranging from approximately US$896 to US$857 a share.
This is the first time Musk has sold shares in Tesla since his ill-fated attempt to purchase the social media company Twitter Inc (NYSE: TWTR). Musk initially sold shares to help fund the takeover, but this has sensationally been abandoned since. Albeit not without some legal action.
When a CEO or any management member sells out of their company's shares, it can often cause some consternation amongst investors. After all, a CEO (especially Elon Musk) is supposed to be 'cheerleader in chief' for their company. Thus, it's hard to spin a sale of shares as a vote of confidence in said company's future.
Why is a CEO like Elon Musk selling Tesla shares?
But the reality is that Elon Musk, like many billionaires, has the vast majority of his wealth tied up in shares. Many of his other companies, such as Space-X, are private, which means that it is far harder to sell those shares.
So if Musk wanted (or needed) to free up some cash – maybe he wants to buy a new house, or island – he might have little choice but to sell some of the vast stake he owns in the publically-traded Tesla.
But even though Musk has offloaded around US$7 billion in Tesla shares over the past week, he still owns just over 155 million shares. That means his remaining Tesla stake is still worth roughly US$131.78 billion. Not quite a drop in the ocean. But no one can argue that Musk no longer has skin in the game.
At the last Tesla share price, this US tech titan has a market capitalisation of US$887.82 billion. Tesla stock is still up more than 1,700% over the past three years.
