Musk sold 5.3 million shares of Tesla stock for an average price of $905.30, according to filings he made with the Securities and Exchange Commission Thursday. The sales represent only 3.1% of the Tesla shares he held outright at the start of the day Tuesday, and just less than 2% of his total holdings of Tesla if stock options he controls are included.
Insiders at a company, such as Musk, must report purchases or sales of their company’s stock to the SEC to inform the broader investment community of their activity. But they have a couple of days to make that filing and still comply with the rules.
Musk’s sales of Tesla shares were large enough to put downward pressure on the stock’s price. The number of shares sold represented 20% of the normal trading value in Tesla shares so far this year before Tuesday. And Tesla shares lost 12.2% of their value during the course of trading Tuesday, the biggest one-day drop in Tesla shares since September of 2020. The stock’s decline prompted a selling spree by other investors, as 45 million shares traded hands, about twice the volume of trades the day before.
But there are limits to how much money he can raise simply by pledging his Tesla shares as collateral. He can raise more money by simply selling some portion of his Tesla shares. Tesla corporate rules state that officers and directors of the company can raise only 25% of the value of the stock being pledged as collateral.
As of June 30 of 2021, company filings show he already had pledged 88.3 million of his Tesla shares as collateral, but those shares were pledged years ago when Tesla shares were worth a small fraction of their current value. He would likely be able to borrow more money even against some of those shares. And the estimated 79 million unpledged shares that he owns after Tuesday’s sales could be used to borrow $17 billion, even with the recent decline in Tesla share price.