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Elon Musk, the chief executive of Tesla and a string of other companies, is again selling shares for profit in a risky bid to save time for other, bigger fund-raising moves.
Tesla will announce Monday morning, according to a form that Musk has just filed with securities regulators, that it plans to sell an additional 3.05 million shares, exercisable in three years, according to a form that Musk, the company’s chairman, has just filed with securities regulators. The offering by Musk would be in addition to a larger $1bn share sale Tesla is mounting.
At the price Tesla currently trades on private market, the proposed smaller share sale could reap $764m, or €675m, potentially less any immediate discount that investors might seek given the shares aren’t going out for three years.
It’s also another sign that Musk will be selling soon, if not to buyités, then at least to buy some short-term breathing space for his flotation ambitions. Last week, the billionaire announced he planned to sell $700m (€580m) worth of shares in his rocket company SpaceX, of which he is the chief executive.
The Tesla filings did not say how many shares in Tesla Musk was prepared to sell. He currently holds 202.5m shares. The sales by Musk of $700m worth of SpaceX stock prompted premature worries that he was timing his stock market exit to coincide with what will be a bruising week in global shares and an escalation in the Sino-US trade conflict.
SpaceX on Friday filed to sell shares for $100 (€82) each, down more than a fifth from a price Tesla commanded three months earlier, according to the filings. The regulatory documents also did not disclose the intended size of the share offer, which could help give an indication of Musk’s expected sales.
On Monday, Tesla was adamant that he, personally, was not deserting the company. “In order to ensure Tesla continues to have access to capital, Mr Musk intends to sell TF [Tesla founder] shares from time to time at his discretion,” the company said in his filing on Monday.
The news of another sales drive in a ballooning market by Musk – the entrepreneur is also selling up his homes in California and New York – came shortly before US markets opened. Shares in Tesla were already slightly lower than their close on Friday in after-hours trading, before the stock market signalled the Sino-US trade talks were running into trouble, even before Trump threatened to veto any investment legalisation bill that did not meet his demand for an end to immigration by people from five majority Muslim countries.
By mid-day in New York on Monday, Tesla’s shares had lost more than 7% of their value, as Wall Street traders assaulted several high-tech stocks in response to Trump’s musings on Friday night.
China’s response to Trump’s demand that any bill to legalise investment in Chinese telecoms firm ZTE, which is accused of breaching sanctions with Iran and North Korea, be accompanied by an end to related immigrant rights, meant that global equities fell sharply on Monday.
The dropping of the planned share sale on Monday morning is a relief to Musk, who had hinted last week that Tesla might raise as much as $5bn (€4bn) in what would be one of the largest share offers by an individual company. A proposed jointfloatation with Musk’sSpaceX was delayed, although in an extraordinary move, Musk sowed confusion last week by tweeting: “Tesla is making too much progress to put the brakes on now, so we’re heading for the accelerator … my super connected Tesla Model 3 feels like a concept car from the future. Zero to 60mph in less than 4 seconds – possible next year.”
Tesla was put together 14 years ago as a niche electric car company, when its capacity to take on the large established car manufacturers would have seemed an absurd dream. Now Musk suggests that, according to his dashboard information, it does have supercar acceleration, although how this matches up with the long delays customers continue to experience, is unclear.
Despite this, investors had been betting that Musk would bounce back since last summer, when he briefly became the world’s richest man. The latest filings suggest that Musk is being more cautious as Tesla readies itself to launch the long-delayed affordable Model 3.
The California car company’s ability to turn around a sinking share price will hinge on whether it will manage to offload enough of these $35,000-Model 3s at a time, with or without executives such as Musk selling up a tranche, to regain consistency in its profit and loss statement.
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