Tesla Inc. shares fell for the second day in a row on Tuesday, as investors dumped the high-flying stock ahead of a potential stake sale by company chief Elon Musk.
Shares of the electric-car maker were recently down 11.6% at $1,026. They were on track to lose about $133 billion in market capitalization, far more than Ford Motor’s overall market cap, in addition to a loss of nearly $60 billion on Monday.
Musk asked his Twitter followers over the weekend if he should sell his 10% stake in the company, as Washington proposes to increase taxes for the super-rich. About 58% said they would support such a sale.
“People are speculating that he is going to hit the market and start selling shares. They are trying to get ahead of that,” said Dennis Dick, a trader at Bright Trading LLC.
Musk may time the proposed sale to coincide with a roughly $11 billion federal tax bill that would be triggered by exercising a portion of his Tesla stock options worth $26.6 billion as of Monday.
After a blistering run in October, Tesla shares are up about 47% year-over-year.
While the stock sale could solve a major tax headache, Musk’s tweet raised questions about a possible breach of his agreement with the US securities regulator. He was fined $20 million by the US Securities and Exchange Commission (SEC) for tweets in 2018 and required him to step down as chairman.
Following the sharp jump in Tesla shares, “Musk has used the now controversial political debate over billionaire taxes as an opportunity to monetize his billions of assets without reflecting a negative outlook on the company or its share price,” said Jones. wrote Michael O’Rourke of Business at the end of Monday. “It is highly unlikely that there are institutional buyers for Tesla shares at current prices.”
Elon Musk’s brother Kimbal Musk applied on Friday to sell 88,500 Tesla shares worth $109 million.
Investors will be watching the SEC filing from Tesla closely for any details on Musk’s plans. SEC rules give companies four business days to report major incidents.
Meanwhile, rival electric-vehicle maker Rivian Automotive Inc. is set to price its nearly $10 billion initial public offering at the end of Tuesday.
Backed by both Amazon.com Inc. and Ford Motor Co., Rivian raised the price range of its offering last Friday, as investors bet on the company to become the next big player in a field dominated by Tesla.
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