Key points:
- The news of Musk's Tesla sales pushed the price down 2%
- TSLA has now recovered that 2%
- The market seems to accept Musk's justification of better now than in emergency later
Tesla (NASDAQ: TSLA) stock dropped 2% and change on the news that Elon Musk has sold another slice of his stock. This morning TSLA is up 2% and change premarket to leave the stock price about where it was before the news. Clearly, Musk selling $6.7 billion or so of Tesla stock isn't worrying the market all that much then. The issue that matters is, well, why?
The actual sales themselves might have had some effect on the price of course. Musk is a substantial holder, his sales would have added to that sell side pressure. In the period of the selling itself Tesla was well up over $900 (at $930 at some points) and it's now back down to $870 or so. So there's the market reaction to the volume of stock being moved through that market. But the issue of Musk selling stock is, of course, different from the issue of other investors selling stock.
Apart from anything else Musk announced four months back that he was done selling stock – barring exigencies. That reason to sell more has now arrived according to Elon himself. Which is fine, the world does turn and change. But as we say, Musk selling stock is more important as he's so much the public face and driving force at Tesla.
Also Read: How To Buy Tesla Shares
As to why the fairly boring TSLA stock price moves on the news of Musk's sale. The effect on the market price of the actual sales themselves obviously happened as the sales themselves did. So we could perhaps say that move from $930 to $870 was a result of the sales. We could also say that the move from $870 to $850 was a result of the news of the sales.
Yes, the driving force of a company reducing their stake would indeed be the sort of news that could introduce a little fragility into the Tesla share price. But that then leaves open the issue of why that drop has been regained this morning?
The general mutter in the marketplace is that Elon Musk's explanation makes sense. Far better to have a liquidation of some TSLA stock now than have to pull an emergency sale out of the hat if the Twitter case goes against him. As he says, if he actually does have to buy TWTR, and also some equity partners drop out, then he's going to need money in a hurry. Better to do it now.
For if it has to be done in an emergency manner then others will see that it does. That would mean a pushing down of the Tesla price just as Musk needs to sell. As Musk says, perhaps better to do it now, in an orderly manner.
That is, of course, if that very much darker rumour floating around isn't true. That the whole Twitter game is to give Musk and acceptable reason for reducing his Tesla stake. But that's a muttering which isn't so much 4D chess as wandering off into fantasy perhaps.