Tesla shares hit a two-year low in Friday’s volatile trading, despite CEO Elon Musk’s promise not to sell his shares in the company for at least two years. The announcement failed to reassure investors, as Musk has already sold off $40 billion worth of Tesla stock since late last year, including $15 billion after making a similar pledge in April. The stock sales were partially used to fund the acquisition of Twitter.
“If Musk sells another billion or so dollars of shares in the near future, and that exerts downward price pressure on Tesla’s share price, investors might have a decent claim for securities fraud,” said Howard Fischer.
“If this was another CEO of a Fortune 500 company making that statement, the market would be confident that ‘he said it, so he’s not selling,’” said Dennis Dick, head trader and market structure analyst at Triple D Trading.
Tesla’s shares have fallen 64% this year, potentially marking their worst annual performance since the company went public in 2010. Investors are concerned that Musk’s involvement with Twitter is taking up a significant amount of his time and detracting from his attention to the electric car company.
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On Friday, Tesla’s stock decreased 0.6% after dropping as much as 3.5% earlier in the day to reach its lowest point since September 2020. Musk has had a history of conflicts with the Securities and Exchange Commission (SEC). In 2018, he faced the SEC’s reprimand for tweeting about his intention to make Tesla a private company and was required to pay $40 million in penalties, resign as chairman, and add new directors to the board. The SEC also ordered the implementation of controls to monitor Musk’s communications.
According to S3 Partners, approximately 3.1% of Tesla’s float shares, or shares available for trading, are currently being sold short, representing an increase of 33% since the beginning of the fourth quarter. “Selling short” refers to the practice of betting against a stock by selling shares that are borrowed in the hope of buying them back at a lower price in the future.