With another important drop today, Tesla (TSLA) has now dropped more than 12% since CEO Elon Musk announced that he would sell 10% of his stake.
It’s not clear whether Musk has started selling, but his brother, Kimbal Musk, managed to sell $100 million just before Elon publicized his withdrawal.
Last weekend, Elon floated the idea that he would sell 10% of his stake in Tesla if a Twitter poll would agree, which it unsurprisingly did.
It put a stop to Tesla’s historic rally that saw its market capitalization of over $1 trillion.
Today, Tesla had its biggest stock price crash in a long time, dropping by as much as 10% intraday.
Musk selling Tesla shares casts a negative shadow on the stock, no matter the reason he gives for it, but with the kind of volume he is talking about selling, the actual selling pressure could also contribute to the crash.
As of last week, the CEO was holding 170.49 million Tesla shares, which means that 10% is 17 million shares or about the average daily volume of Tesla shares exchanging hands.
Today, Tesla’s trading volume surged to 35 million shares by midday with massive sales at around 10 a.m.:
It’s unclear whether Musk has started selling stocks, but it’s clear that a lot of people are, including his own brother.
Kimbal Musk is a Tesla director, and therefore, he has to disclose if he buys or sell Tesla shares.
He recently disclosed having sold 15% of his stake in Tesla, which is worth just over $100 million:
Kimbal managed to sell at Tesla’s all-time high just days before his brother announced his plan to sell 10% of his stake, which likely partly triggered the important stock correction.
If the CEO has also started selling shares, Tesla will have to disclose in an SEC filling by the end of the week.
Speaking of the SEC, the agency might be interested in the current situation.
In 2018, the SEC filed a lawsuit against Elon Musk over his infamous “funding secured” comment regarding his failed attempt to take Tesla private.
The Security and Exchange Commission (SEC) judged that Musk exaggerated when saying that the funding was “secured.”
Tesla and Musk ended up reaching a settlement with the SEC.
As part of the settlement, Musk agreed to step down from the role of chairman of the board and both Tesla and Musk each had to pay $20 million fines.
The CEO presumably didn’t want Tesla to have to pay for his issue with the SEC, and while he couldn’t directly pay for Tesla’s part of the fine, he decided to buy $20 million worth of shares from Tesla.
As we previously reported, he ended up making a lot of money from paying Tesla’s penalty, thanks to the increase in stock price.
But another condition of the settlement was that Musk needed to have Tesla lawyers review his tweets that could affect Tesla’s stock price before they’re posted.
The SEC already complained to Tesla that Musk appeared to not follow the condition of the settlement.
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