Tesla owner Elon Musk with his new move has again stunned the world. This time he has cashed around $3.6 billion in Tesla stock as the company’s executive is facing mounting interest payments and the prospect of a painful recession.
According to the Securities and Exchange Commission, the filing revealed on Wednesday that the owner of three companies – Tesla, SpaceX, and Twitter, Elon Musk has sold around 22 million shares in three days straight this week. The prices ranged from $155 to $177.
The discharge of stocks reduced the company’s stake to 424 million or about 13.4% of the electric vehicle company.
The pandemic was a boon for some companies including Tesla which saw a rise in stock price up to $400 in November 2021. The market capitalization has however dropped from $1.2 trillion to below $500 billion as of today.
Some investors believe that Elon Musk’s takeover of Twitter for $44 billion was a costly distraction from the selloff.
He sold around or more than $15 billion Tesla shares this year to assist him with the deal with Twitter. Further, he spent $4 billion on the stock in November.
Moreover, he took billions of bank loans which is stated in the balance sheet of Twitter that requires payment of interest.
Musk’s Tesla has been caught up in a broader sell-off of growth supplies in favor of slightly risky purchases. The tech-heavy Nasdaq equity index has fallen over 29% this year, outpacing the benchmark S&P 500’s 17% drop over the same period.
Inflation has overflowed to 40-year highs this year, bringing about the Federal Reserve to hike rates from almost zero to over 4%, in a proposal to cool the economy and constrain the rate of price increases. However, the unfortunate combination of increasing prices and borrowing expenses is scraping customers and companies, and threatening to plunge the US economy into recession.
Tesla and other stocks have been crashing particularly hard by inflation and rising rates, as they’re greatly valued based on their cash flows in the years to come. Nevertheless, those cash outpours have become somewhat less appealing when expenses are flying and investors can gain bigger, risk-free returns from Treasury bonds, savings accounts, and different safe assets.
Musk, who has been advising the Fed to change its hikes to avoid an unbearable recession, underlined the risks of owning capital when rates are rising and the economy is deteriorating.
“At risk of stating obvious, beware of debt in turbulent macroeconomic conditions, especially when Fed keeps raising rates,” he said.