Here's Why Musk Offloaded $4 Billion Worth of Tesla Shares; Five Key Points

Elon Musk has sold Tesla stock worth about $4 billion a week after he completed the $44 billion deal to buy Twitter and privatize the microblogging platform.

The Tesla Chief Executive Officer sold some 19.5 million shares of the electric vehicle company, according to regulatory filings in New York. Tesla shares rose 0.8 percent in the pre-market trading in New York, following the news.

Tesla stock split

Sale Not Pre-Planned

The share sale was not pre-planned, Wall Street news outlets reported, and there is no comment yet from Elon Musk or his aides about the plan behind the Tesla share sale, which is the third such move this year. Musk had sold huge chunks of shares in Tesla in April and August this year, after he announced the bid to buy Twitter. According to Bloomberg calculations, Musk unloaded $36 billion worth of Tesla shares in the past year.

Liability From Twitter Acquisition?

It is also not completely clear how Musk financed the Twitter deal. Musk, the world's richest man, had about $20 billion cash when he readied his war chest to buy Twitter, as per Reuters calculations. Most of this amount was raised through share sale in Tesla in November and December last year as well as April and August this year.

The Tesla and SpaceX co-founder would have needed at least $2 to $3 billion more to complete the Twitter acquisition, after taking into account personal commitments from his billionaire friends and institutional investments from the likes of Saudi Arabia's Al Waleed bin Talal.

Elon Musk
Elon Musk Twitter

Timing of the Share Sale

Some analysts questioned the timing of the Tesla share sale, but a Reuters report from a few weeks ago had said that Musk was expected to sell more of his Tesla stake after the electric automaker announced quarterly results on October 19.

What the Tesla Share Sale Means

Most of the analysts agree that Musk's decision to sell more Tesla shares means that he is gearing up to face a tough time running Twitter. "It looks like Musk is preparing for things to stay bad at Twitter for the next year ... He's preparing for Twitter to be a money hole," Gene Munster of Loup Ventures said, according to Bloomberg.

Poor Finances at Twitter

The report adds that Musk immediately faces as much as $1.2 billion in annual interest payments alone at Twitter. Twitter's revenue has come under strain after several advertisers pulled ads from the platform following Musk's takeover. In the aftermath, Twitter is rolling out an extensive job trimming and other cost-saving moves.

Tesla stock split

Impact on Tesla Shares

Over the last year, Tesla shares have turned weaker, alongside Musk's paring of his stake in one of the world's largest companies. The value of Musk's holdings in Tesla once accounted for a whopping $340 billion. However, this has come down to about $179.5 billion as a result of the drop in the value of the stock and the share unloading by Musk. Tesla stock is down 53 percent from its peak last year.

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