Elon Musk could have to sell billions price of Tesla shares to avoid wasting X

Musk’s repeated outbursts against advertisers have dried up the foremost income for the loss-making company formerly often called Twitter. The recent decision to sue them for following his own advice not to purchase ads on the platform hasn’t helped. At some point, he’ll need to offer a fresh injection of money to avoid wasting his $44 billion acquisition. And that would mean Musk selling Tesla shares to boost the cash – which might hurt everyone who holds the automaker’s stock.

“I would expect $1 billion to $2 billion worth of stock,” said Bradford Ferguson, president and chief investment officer of asset manager Halter Ferguson Financial. This alone could cause the stock to lose between 5 and 10 percent of its value. “That’s a huge hole they need to plug.”

Elon Musk was not reachable via Assets for a comment.

Ferguson based his assessment on internal figures from the second quarter recently received from The New York TimesAccording to the report, X posted revenue of $114 million within the United States, by far its largest market, down 25% from the previous three months and 53% from the identical period last yr.

That sounds bad. But it gets worse. The last publicly available figures Before Musk took over, i.e. as of the second quarter of 2022, sales were $661 million. After accounting for inflation, sales in today’s dollars have actually fallen by 84%.

No one knows how long X can survive for the reason that company doesn’t publish financial results. But in November, Musk himself admitted that X could face bankruptcy resulting from the promoting boycott.

Since then, there was talk of achieving Cash flow breakevenlet alone making an actual profit, has stopped. In and of itself, that is unusual for somebody like Musk, who has no qualms about announcing goals so aggressive and unrealistic that he repeatedly fails to satisfy them.

Commitment to not sell shares until 2025 is about to run out

The problem for Musk is that although he’s the richest person on the planet, he cannot simply plug financial holes at X together with his personal fortune, which is estimated at $500,000. over 236 billion US dollars by Forbes.

That’s because the cash is nearly entirely tied up in his various corporate holdings, which include the whole lot from rocket builder SpaceX and brain chip maker Neuralink to his latest startup, xAI.

None of those investments are easily replaceable. Only Tesla is a publicly traded company, so the only solution available to it’s to liquidate a few of its remaining 12% stake.

Continuous dumping After all, by releasing Tesla shares to an unsuspecting market and driving the share price all the way down to a two-year low, Musk funded most of Twitter’s $44 billion enterprise value.

In December 2022, Musk promised during a Twitter Spaces discussion to not upset investors by selling more shares to maintain the ailing platform alive for a minimum of one other 18-24 months. “Definitely not next year. Probably not the year after that either,” he said said“You can count on me, no stock sales until 2025 or so.”

When you tell your customers to fuck off after which sue them once they stop promoting in your platform, it’s hard to have any sympathy. Advertisers have the suitable to position ads wherever they need, and if it feels unsafe for advertisers to position ads on X resulting from neighborhood concerns… https://t.co/RVu7rhXnTM

— Gary Black (@garyblack00) 14 August 2024

While this created a floor under Tesla’s share price, some could have forgotten his implicit warning that the time might come when he would must sell his shares again.

With 2025 fast approaching, X’s financial situation could also be bleaker than ever. Ferguson fears that Musk will need to money in on his Tesla shares sooner somewhat than later.

“He was probably a little more optimistic in December 2022 and didn’t expect things to get any worse,” Ferguson said.

The asset manager argued that it might be obligatory, for instance, to be certain that X complies with the loan terms for the $13 billion leveraged buyout (LBO) debt it assumed as a part of the deal. A breach could lead to higher rates of interest or perhaps a demand for repayment from the banks.

Gary Black, managing partner and co-founder of The Future Fund, agreed that the risks of selling shares were increasing.

“X’s loss will continue and at some point Elon will have to sell more Tesla shares to plug the $1 to $2 billion per year hole at X,” argued the longtime Tesla bull.

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