Musk's Tesla stock sale windfall dwarfs Twitter loss

Elon Musk's attempt to scrap his purchase of Twitter Inc may leave the world's wealthiest person in a stronger financial position than before he unveiled the US$44 billion (S$61.9 billion) deal, with billions of dollars in cash from selling Tesla shares now sitting in the bank.

After Musk on Friday (July 8) tore up his April 25 agreement to buy the social media platform, with Twitter promising to force him to make good, the two sides face a potentially drawn-out legal battle that could still cost Musk billions of dollars, according to legal experts.

Whatever the outcome may be, the Tesla chief executive for now appears to be sitting on around US$8.5 billion in cash raised from selling shares of the automaker late in April to finance the Twitter acquisition. In the last week of April, Musk sold 9.6 million Tesla shares at an average price of around US$885 per share.

"He is almost certainly in a better cash position now than he was a year ago because he has sold so much Tesla stock, particularly at a fairly high price," said Guidehouse Insights analyst Sam Abuelsamid.

"However, depending on what the ultimate outcome of the litigation around this is, he could end up being in a much worse situation."

If Musk loses his legal battle against Twitter and is forced to complete the acquisition or pay a stiff penalty, he could conceivably have to sell more Tesla shares, spooking investors and hurting the value of his remaining Tesla stake, said Abuelsamid.

Tesla shares slumped 6.5 per cent on Monday. Following his stock sales in April, Musk tweeted, "no further TSLA sales planned."

Brian Quinn, a professor at Boston College Law School, said he would not be surprised if Musk and Twitter eventually agree on compensation of more than US$1 billion for Twitter.

"For his part, Musk would be poorer, but also not stuck with owning the company," Quinn said.

At the time Musk sold his shares in April, Tesla investors worried that buying Twitter could become a distraction for Musk while Tesla faces growing worries about the economy and mounting competition from rivals. But while CEO stock sales normally make investors nervous, the Twitter deal provided a reasonable explanation for Musk to reduce his massive stake in Tesla.

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In December, Musk cited looming options expiries and tax payments for the sale of over US$16 billion of Tesla stock.

Since selling Tesla shares in April, the stock has tumbled 19 per cent, with it and other growth stocks hammered by investor worries about inflation and a potential recession. If Musk had not sold those Tesla shares, they would now be worth almost US$1.6 billion less.

It is not clear how much income tax Musk may pay on proceeds from the sale of his Tesla shares.

Musk receives no salary from Tesla, instead earning billions of dollars worth of stock options after hitting several stock and performance targets in recent years. He still owns about 16 per cent of Tesla, worth about US$115 billion.

Musk has not done as well with Twitter shares he bought before announcing he would acquire the company. Musk purchased 73 million Twitter shares for US$2.64 billion through January to April, at an average price of around US$36 per share. Twitter's stock tumbled 9.5 per cent to US$33.50 on Monday. At that price, the value of his Twitter stake has fallen by about US$200 million.