The SEC filings show Musk’s transactions occurred between August 5 and August 9, shortly following the electric vehicle company’s 2022 annual shareholder meeting on August 4 in Texas.
Previously, Musk had announced on social media that he had “no further TSLA sales planned” after April 28.
The CEO’s latest stock move has prompted supporters of the EV brand to question if Musk is now truly finished selling Tesla shares and if he might repurchase the shares in the future.
In response, Musk said, “Yes. In the (hopefully unlikely) event that Twitter forces this deal to close and some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock.”
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Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
In case you might have missed the news last week, Elon Musk and his team of lawyers have stated their intention to withdraw Musk’s highly publicised bid to acquire Twitter, with the prospect of a long, drawn-out legal battle now on the cards.
This decision was, however, somewhat anticipated amid speculation that he was significantly over-paying for the social network.
Musk’s original offer was a $43 billion purchase of Twitter at $54.20 per share. At the time, this was a noteworthy 38% premium above the trading price of ~$45.81 per share.
In recent weeks, the trading price has been falling, and after the news broke the price action certainly didn’t inspire confidence, plunging over 10%, trailing below the 20-day moving average, and closing right on the lows of the day at $36.78.
However, this slump in valuation is a pattern that has occurred within most US tech stocks since April. Twitter’s new share price of $33.50, down 9% in early Monday trading last week, is arguably a more accurate reflection of the social network’s prospects.
Generally speaking, Twitter’s sluggish stock performance isn’t solely in response to Elon’s whims. The economy is stalling globally and economic headwinds are becoming more severe.
Twitter is also struggling to grow its user base, and some analysts have suggested that social advertising spending is likely to be cut, which Twitter relies heavily on for a source of revenue, as companies tighten their belts to grapple with the economic environment.
But, according to the termination letter, one of the main reasons that Elon is pulling out is not due to Twitter’s recent stock performance, but instead due to the prevalence of bots on the site and doubts over Twitter’s ability to determine how many monetisable daily user accounts (mDAU) the social media network actually has. Twitter, however, insists that fewer than 5% of the stated mDAU are false or spam accounts.
On top of this, Twitter’s recent firing of two high-ranking employees and a third of the talent acquisition team are cited within the termination letter. Under the terms of the merger agreement, the company must “preserve substantially intact the material components of its current business organisation.” Musk’s team claimed that the proper process was not followed.
It’s also possible that Twitter’s valuation was ‘protected’ by Musk’s buyout price, which is important to note. Since the acquisition deal was announced, Twitter is currently trading down by roughly 20%. However, Snap is also facing similar issues, down notably more at around 57%. Investors should therefore take note of wider market movements and tech stock valuations when considering their investment strategy.
Uncertainty around Twitter’s acquisition is likely to continue for the duration of any legal battle, and against the current economic backdrop, we’d expect to see investors exercise more caution, as we await to see whether Twitter’s share price can ride out the storm.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance.
In a statement to the US Securities and Exchange Commission (SEC), Musk’s representatives said Twitter had breached the terms of the agreement and “appears to have made false and misleading representations.”
They claimed the social media giant also failed to provide requested data to enable Musk to "make an independent assessment of the prevalence of fake or spam accounts" on the platform.
“Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information,” the statement read.
Musk’s withdrawal from the deal saw shares of Twitter drop by 7% in extended trading.
The deal’s terms require Musk to pay a $1 billion fee if he fails to complete the transaction. However, Twitter’s board is planning to take legal action against Musk instead of accepting the $1 billion fee.
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1. PayPal
Following the financial success of his first-ever startup, Zip2, which sold for $307 million in 1999, Elon Musk went on to invest the bulk of his profits into his next venture. Musk founded financial services company X.com, one of the world’s first online banks, alongside Harris Fricker, Ed Ho, and Christopher Payne.
By 2000, X.com had merged with Silicon Valley software firm Confinity Inc and changed its name to PayPal. eBay purchased PayPal for $1.5 billion in 2002 when Musk owned 7,109,989 shares in the company. This made Musk the largest shareholder with a stake of 11.7%.
Following PayPal’s sale, Musk exited his position and used his proceeds to fund even larger investments such as SpaceX and Tesla.
2. SpaceX
Elon Musk founded his space exploration company SpaceX back in 2002, with the company’s founding mission to revolutionise space technology, including developing spacecraft that are capable of transporting humans to Mars.
In 2006, SpaceX was awarded a lucrative contract with NASA and, by 2008, SpaceX launched the first-ever private liquid-propellant rocket to reach orbit — Falcon 1. In 2010, SpaceX’s Dragon spacecraft travelled to the International Space Station (ISS) and, two years later, NASA granted Musk’s company a second contract to help shuttle crew members to the ISS. In 2021, NASA agreed to yet another contract with SpaceX to ferry astronauts from lunar orbit to the surface of the moon aboard its Starship vehicles.
In May of this year, SpaceX’s valuation hit a whopping $125 billion, a $25 billion increase from just the year before. Furthermore, last October, investment bank Morgan Stanley predicted that SpaceX could see Musk become the world’s first trillionaire, with analyst Adam Jonas expecting the company’s worth to rapidly reach £200 trillion and beyond as SpaceX cashes in on a range of potential space-related industries.
3. Tesla
In the early 2000s, Elon Musk co-founded electric vehicle startup, Tesla, contributing $6.5 million of the initial $7.5 million round of investment in 2004 and becoming the company’s chairman. In 2008, Musk became Tesla’s CEO and, two years later, Musk decided to take Tesla public. The EV company launched its initial public offering (IPO) on Nasdaq in June, with shares of common stock initially available to the public at $17 per share.
In October 2021, Tesla became the sixth company in US history to be worth $1 trillion. As of April 2022, Musk is Tesla’s largest shareholder, owning approximately 17% of the company’s shares, or around 175 million shares overall.
Commenting on Tesla’s purpose in 2019, Musk said, “The fundamental goodness of Tesla ... so, like the ‘why’ of Tesla, the relevance, what’s the point of Tesla, comes down to two things: acceleration of sustainable energy and autonomy.”
“The acceleration of sustainable energy is absolutely fundamental because this is the next potential risk for humanity [...] So obviously, that is, by far and away, the most important thing.”
4. The Boring Company
In 2017, Musk founded The Boring Company — an infrastructure and tunnel construction services company. Behind The Boring Company is the premise that finding effective ways of digging tunnel networks for vehicles and high-speed trains will end traffic congestion. The company aims to reduce the cost of tunnelling whilst simultaneously making tunnel production more efficient.
In 2019, the Las Vegas Convention and Visitors Authority approved a $48.6 million proposal from The Boring Company to produce the LVCC Loop, an underground tunnel that would run beneath the Las Vegas Convention Center, featuring three stations and also a tunnel for pedestrians.
By 2021, The Boring Company had officially completed the loop and opened it for public use. As of 2022, The Boring Company is valued at almost $5.7 billion and has also completed additional projects in Hawthorne, California and has another ongoing project in Las Vegas.
Final Thoughts
As the world’s richest man, Elon Musk has made some risky yet incredibly smart investments over the years. We hope you enjoyed looking at 4 of his greatest.
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Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
Tesla
Despite a positive start to June, Tesla’s shares failed to hold above the 20-day working average, showing that the downward trend is still firmly intact.
However, with business magnate Elon Musk continuing to make headlines, it shouldn’t come as too much of a surprise that shares have taken a tumble. Just recently, he declared that approaching a recession was a “good thing” and later denounced remote working for Tesla employees.
Musk also told Tesla executives to pause all hiring and cut 10% of the total workforce. A move which has drawn strong criticism but also concern that talented employees will be deterred.
Despite this, Tesla’s AI Day scheduled for September 30th will showcase the Optimus Robot and the company remains a leader in the autonomous vehicle space.
Investors are right to be wary given Tesla is down by over 40% from all-time highs. However, ongoing geopolitical events have meant supply chains have been squeezed, another factor in the extent to which shares have been impacted.
Investors should sit tight to see whether Tesla stock was right to be criticised as overvalued or if Elon Musk can prove the critics wrong.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance does not guarantee or predict future performance.
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On a valuation spectrum between penny stocks and blue-chip stocks, growth stocks take a peculiar position. Although they are not as nearly as speculative and volatile as penny stocks, growth stocks are based on the expectation they will eventually assume the highest form - blue-chip stocks. After all, blue-chip companies are perceived to deliver both dependable dividends while also growing.
Netflix And Tesla: Two Sides Of The Growth Coin
On this expedited growth journey, some companies fumble while others take a category of their own. This process appears to be unfolding with Netflix and Tesla. Netflix's April earnings report tells a story of hitting the brick wall of expectations, while Tesla's valuation forecast seems to be boundless.
Netflix Stock Ousted From The Growth Club?
Netflix gained its momentum by naturally filling the niche of a dying breed, the video rental business spearheaded by Blockbuster. In fact, the CEO of Blockbuster, John Antioco, spectacularly failed to notice the new video-streaming trend on the horizon. Netflix founders approached him in early 2000 to sell Netflix for $50 million.
Fast forward to late 2021, and Netflix grew by 7,536%, from a $50 million deal offer to a $318 billion market cap. As growth tech companies go, replacing and cornering a specific market, one couldn't have asked for a better result. However, year-to-date, Netflix (NFLX) dropped to rock bottom in early 2022, returning to a December 2017 level market cap of $83.36 billion.
Did Netflix lose its growth stock status?
Not quite. The Covid-19 pandemic may have pumped Netflix's usage as the go-to content delivery platform, but Netflix’s valuation has been heavily reliant on subscriber numbers. It has been an open secret that Netflix has an account sharing problem, which the company tolerated to spur growth, openly admitting as such this April, in a letter to shareholders.
"Our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating revenue growth headwinds. The big COVID boost to streaming obscured the picture until recently."
There are two key admissions here. The baseline for Netflix’s valuation is largely inaccurate because it relied on account sharing. Moreover, with the Covid-19 boost gone, the company is now forecasting a decline in subscribers by 2 million for Q2 2022. Hence, this is why Netflix suffered a valuation reset back to a late 2017 level, as Bank of America downgraded its ranking from "buy" to "underperform" in April.
With a new reset price, Netflix's explosive growth narrative is over, but it also serves as a new starting point. Yet, Netflix itself admits that it will take at least until 2024 until its password-sharing crackdown and ad-boosted subscription monetisation produce a major effect.
Bank of America analyst Nat Schindler said, "It will take a while for investors to believe Netflix can return to growth."
With that said, Netflix revenue for Q1 2022 is still up by 9.8% compared to the same quarter a year prior, at $7.8 billion. While that is not hyper-growth, it is growth nonetheless. When all is said and done, shouldn't it be the case that the removal of unsupported growth figures has the same valuation reset effect on another growth company?
Tesla Continues To Defy The Odds
Tesla's April earnings report showed that the company has 6.5x stronger sales than the year prior. The EVs generated $3.3 billion in Q1 profits, a 658% increase from Q1 2021. Moreover, Tesla reported an 81% increase in total revenue, to $18.8 billion. While these figures are positive, do they justify Tesla's enormous market cap of $797.7 billion?
In other words, is another valuation reset incoming? Over the last 5 years, Tesla's story was one of hyper-growth just like Netflix, gaining 1,137% appreciation. Year-to-date, Tesla (TSLA) stock too suffered a downturn, but not as nearly as much as Netflix (NFLX).
If anything, it seems that Tesla's downturn can only be attributed to the general equity market decline due to the Fed's interest rate hike. The Fed tapering increases borrowing costs, so investors tend to exit growth — and especially tech — assets into safer commodity harbours.
Yet, at face value, if any company is due for a valuation reset it would be Tesla. Elon Musk's baseline business model revolves around manufacturing and selling electric vehicles (EVs). Yet, it has done so at a considerable lower rate than traditional car companies.
Case in point, Ford sold 3.9 million cars in 2021, while Tesla sold less than one million, at 937,172, in the same year. Tesla's market valuation does not reflect this gap in the slightest. In fact, when compared to top car companies, one would think that Tesla is the largest vehicle manufacturer in the world. This leads many investors to classify TSLA as an overvalued stock.
What else is then in play for Tesla to maintain its hyper-growth valuation? Does it mean that Tesla's expectation is more valid than that of Netflix?
Before anything else, Tesla has the first-mover advantage in the area that counts the most. While there were plenty of EV companies before Tesla, it was the first company to pull out EVs from the cumbersome EV aesthetic. While Tesla had to push their EVs into the luxury vehicle category to make that happen, it successfully made their cars into status signalling devices.
Governments all over the world further boost this speculation by announcing the gradual ban of gas-operated vehicles. For this reason, there is now the expectation that most vehicles on the road by 2040 will be electric, with Tesla forging the way.
Consumer behaviour has become a factor as well. Despite car insurance rates being generally more expensive for EVs as opposed to traditional gas-powered vehicles, Tesla has taken strides to make their vehicles more affordable. Yet, they also tend to be used as a status signalling vehicle, which generally happens with luxury products.
Combined with Elon Musk's omnipresent online persona, with over 80 million Twitter followers, and SpaceX involvement, this creates a big cushion for Tesla. So much so that not even major supply disruptions can upset Tesla's gains.
With so much market upheaval, it bears remembering why the average stock market return for the last 100 years has remained steady at 10%. While it is anyone's guess if Tesla will keep this momentum going, it also bears keeping in mind that Tesla made it through while openly admitting past underperformance and future downturn.
"Our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through the rest of 2022."
Given such contrast, it is safe to say that Tesla is in its own premium growth stock category, especially now when gas prices are soaring. Case in point, AAA research showed significant pressure to make the transition to EVs when gas prices are up.
At the same time, Netflix, as a software platform, is more of a "take it or leave it" proposition, with many people opting for the latter, viewing Netflix as a luxury item in times of economic distress. While Tesla may offer luxury EVs, abandoning its plan to enter the mid-range category, it appears that Elon Musk managed to fine-tune Tesla's elite brand to absorb negative pressures.
About the author: Shane Neagle is Editor In Chief at The Tokenist.
In a filing earlier this month, Twitter estimated that less than 5% of its monetisable daily active users during the first quarter of the year were spam accounts or bots. However, Musk believes that approximately 20% of accounts on the platform are fake or spam accounts. He has also expressed concerns that the figure could be higher still.
“My offer was based on Twitter’s SEC filings being accurate,” Musk tweeted Tuesday morning. “Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does.”
After becoming Twitter’s largest single shareholder in early April, Musk declared a takeover bid for the social media platform, offering $54.20 per Twitter share. By the end of the month, Twitter had agreed to the deal.
According to the filing, Musk listed 18 investors who agreed to cash investments. Amongst them are Ellison who agreed to $1 billion, Sequoia Capital who agreed to $800 million, and Vy Capital who agreed to $700 million. Meanwhile, Saudi Prince Alwaleed bin Talal agreed to contribute approximately 35 million Twitter shares worth $1.9 billion to retain a stake in the platform post-acquisition.
The investments will see a $12.5 billion margin loan organised through Morgan Stanley and other banks to $6.25 billion. The investments also mean that fewer of Musk’s Tesla shares will be used as collateral under the loan.
Musk’s takeover of Twitter is expected to be completed by the end of this year.
However, the prospective Twitter owner and Tesla CEO insisted that the platform would “always” remain free for “casual users”.
Elon Musk agreed to a $44 billion deal to acquire Twitter last month. At the time, he said that as well as improving the platform’s free speech principles, he was looking forward to “enhancing the product with new features.”
Musk has said he wants to eradicate spam bots from Twitter and “authenticate all humans.” He has also expressed support for a tool to edit tweets that have already been posted – a feature which Twitter had previously confirmed to be in development.
Musk’s takeover of the social media giant is expected to be completed later this year.
The deal was shaken upon on Monday after weeks of speculation about the social media giant’s future following Musk’s emergence as the platform’s largest single shareholder on 4 April. Ten days later, Musk then declared a takeover bid, offering $54.20 per Twitter share.
Initially, Twitter’s board appeared to be against the takeover and introduced a “poison pill” in a bid to block the sale. However, they warmed to the idea after Musk announced a funding package for the deal, which includes $21 billion of his own wealth as well as debt funding from Morgan Stanley.
In the past, Musk has criticised Twitter, claiming it does not allow free speech. In a tweet that followed confirmation of the deal being accepted, Musk wrote, “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated [...] I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating spam bots, and authenticating all humans. Twitter has tremendous potential - I look forward to working with the company and the community of users to unlock it.”
Twitter shares were up more than 5% in the premarket on Monday, following reports from Reuters and Bloomberg that a deal could be reached very shortly.
Prior to the US stock market opening, share trading in Twitter’s stock sent the price up 5.1% to $51.57. However, this figure is still below Musk’s offer price.
Per share, Musk offered $54.20 — $43 billion in total for the social media giant, which he has previously accused of failing to uphold free speech.
While Twitter recently adopted a “poison pill” strategy in a bid to resist a hostile takeover, some investors want to see the social media giant take Musk’s offer into serious consideration.
Shares were up by as much as 6% in after-hours trading following the news.
Automotive revenue hit $16.86 billion, up 87% from the same period last year. Meanwhile, automotive gross margins soared to a record 32.9%, with the EV company reporting a gross profit of $5.54 billion. Regulatory credits made up $679 million of Q1 automotive revenue.
Tesla said revenue growth was pushed forward partly by an increase in the number of vehicle deliveries, as well as an increase in average sales prices.
Earlier in April, Tesla reported making 310,048 vehicle deliveries worldwide for the first quarter. Its Model 3 and Model Y vehicles made up 95% of deliveries in the period ending March 31, 2022.
Despite ongoing disruption from the Covid-19 pandemic as well as the conflict in Ukraine, Tesla CEO Elon Musk remains confident that the company can grow at least 50% over figures from the previous year.
“It seems likely that we’ll be able to produce one and a half million cars this year,” Musk said.
