Is it safe to buy Tesla stocks after Elon Musk’s recent selling?

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on Dec 16, 2022
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  • Tesla's stock price dropped by -60% in 2022
  • Elon Musk keeps selling and investors worry that the Twitter acquisition diverts his attention
  • Tesla is one of the worst performing stocks among major car makers this year

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Elon Musk, Tesla’s CEO, is all over the news. After completing the acquisition of Twitter, a social media company, he has been under pressure to come up with capital to fund it.

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Given that he is the major Tesla (NASDAQ:TSLA) shareholder, he sold millions of shares past the announcement of taking Twitter private. Most recently, he sold another 22 million shares of Tesla, worth about $3.6 billion.

Fillings with the US financial market regulator reveal that the selling took place at the start of this week – Monday, Tuesday, and Wednesday. Naturally, Tesla’s stock price was under severe pressure.

In fact, it is one of the worst-performing stocks of the year.

Tesla underperforms NASDAQ 100 by a mile

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2022 was not a pretty year for stock market investors. Only the last couple of months saw the stocks bouncing from the lows, but they remain in negative territory.

The tech sector, in particular, had suffered a lot.

But the NASDAQ 100 index bounced from the lows and is down only a little over 10% on the year. Yet, Tesla’s stock price declined by close to 60%.

What is happening with Tesla?

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Tesla investors worry that Elon Musk’s recent acquisition of Twitter is diverting his attention from running Tesla properly.

After reaching a market capitalization bigger than $1 trillion at the end of last year, Tesla dropped to less than $500 billion recently. And, given the selling pressure from its own CEO, the decline is likely not over.

The problem with Tesla’s stock is twofold.

On the one hand, from the beginning, Tesla raised $32 billion in equity capital and earned a profit of about $9 billion. But in the meantime, the CEO sold about $40 billion of shares and still needs to sell some more.

On the other hand, many Tesla investors call for the company to start a stock buyback program. But what difference would the program make if the CEO hits the bid with billions of dollars worth of stock when the price is already down by about 60% on the year?

To sum up, despite dropping by 60% this year, Tesla’s stock price cannot bounce as long as Musk keeps selling. One needs to question why does Musk sell at the current price if the company, according to his own saying, would be worth more than Apple and Saudi Aramco combined?

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