Tesla shares snap 11-week winning streak after Musk sells more stock

By Subrat Patnaik and Medha Singh

(Reuters) – Shares of Tesla Inc closed lower on Friday, snapping an 11-week winning streak after filings showed CEO Elon Musk sold another block of company stock worth about $700 million, taking advantage of a meteoric rally that vaulted the electric-car maker’s value to over $1 trillion.

The second round of hefty stock sales this week came just days after the world’s richest person and Tesla’s top shareholder tweeted that he would sell 10% of his shares https://www.reuters.com/technology/musk-asks-followers-twitter-whether-he-should-sell-10-his-tesla-stock-2021-11-06 if users of the social media platform approved the move.

The electric-car maker’s stock closed down 2.8% at $1,033.42 on Friday. The shares are up more than 46% this year following a sharp rally in October.

Musk’s trust sold 587,638 and 52,099 shares on Thursday in multiple transactions totaling about $687 million, according to two separate filings on Friday.

Earlier this week, Musk disclosed he had offloaded some $5.1 billion in Tesla stock. He has now sold about 3% of his shares, according to Reuters calculations.

The stock sales, which marked the first time that Musk cashed out on a stake of that size since the company was founded in 2003, were massive by capital market standards, eclipsing the initial public offerings of most companies.

By getting Twitter users to green-light the move, he has blunted potential criticism of cashing out at a time when Tesla’s valuation has become frothy and shares are at record highs.

STILL MOST VALUABLE U.S. AUTOMAKER

Tesla shares fell 15.4% this week and lost some $187 billion in market value, more than the combined market capitalizations of Ford Motor Co and General Motors Co.

Despite the week’s losses, Tesla is still the most valuable U.S. automaker. Recent strong gains in the stock have underscored demand for shares of electric vehicle (EV) makers.

After the blockbuster market debut of Rivian Automotive Inc https://www.reuters.com/business/autos-transportation/ev-maker-rivian-set-high-profile-market-debut-after-mammoth-ipo-2021-11-10 on Wednesday, the two most valuable U.S. automakers are EV companies.

In a veiled jab at the Irvine, California-based rival, Musk tweeted https://bit.ly/3wGQ7fz on Thursday: “There have been hundreds of automotive startups, both electric & combustion, but Tesla is (the) only American carmaker to reach high volume production & positive cash flow in past 100 years.”

MORE SALES?

Musk had previously said he would have to exercise a large number of stock options in the next three months, which would create a big tax bill. Selling some of his stock could free up funds to pay the taxes.

Prior to the sale, Musk owned a stake of about 23% in Tesla, including stock options. He now needs to offload about 12 million more shares to fulfill his pledge to sell 10% of his holdings.

“We expect the share sales will continue, as Musk holds millions of options worth billions of dollars that would otherwise expire worthless, and he has also prearranged share sales under 10b5-1 plans,” said Jason Benowitz, senior portfolio manager at the Roosevelt Investment Group LLC in New York.

(Reporting by Subrat Patnaik, Akash Sriram and Medha Singh in Bengaluru; Additional reporting by Caroline Valetkevitch in New York and Hyun Joo Jin in San Francisco; Editing by Anil D’Silva, Ira Iosebashvili and Matthew Lewis)

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