In a bold move, Elon Musk just plopped down $1 billion of his own cash to snag more Tesla shares, which might just be what the company needed to kickstart a recovery and see its stock go up for the year.
This purchase, which was done on Friday and made public in a Monday filing, is quite unusual for any CEO, including Musk. It’s rare for company leaders to shower their own money on their firm’s stock without using stock options, which let them buy shares at a cheaper price.
As news of the purchase broke, Tesla’s shares surged by 7% at Monday’s market opening. Although it didn’t maintain all those gains, the stock still ended the day nearly 4% higher, managing to erase a significant portion of its year-to-date losses, which had plummeted by as much as 42% earlier this year.
“This is a huge sign of confidence from Musk, and you can bet investors are thrilled to see this,” commented Dan Ives, a tech analyst from Wedbush Securities and a notable fan of Tesla. “It sends a great message after what has been a very rocky year for Musk and Tesla’s shareholders.”
The Crazy Roller Coaster of Tesla Stock
Tesla’s shares skyrocketed after the election, fueled by hopes that Musk’s closeness to the then President-elect, Donald Trump, would spark positive changes for the company, especially in their self-driving and future robotaxi ventures. Nevertheless, shares took a nosedive after hitting all-time highs in mid-December.
When Musk became actively involved in running Trump’s Department of Government Efficiency, Tesla began to feel the heat from those against Trump, which hurt their sales big time. The first and second quarters were particularly dark for Tesla, marking some of the most significant drops in sales they’ve ever faced, along with plunging profits.
Not to mention, they are dealing with stiffer competition from other automakers diving into the EV scene, especially in the Chinese market. Companies like BYD are set to outpace Tesla, even without their cars reaching U.S. roads.
As the end of the month approaches, Tesla and other automakers will be challenged by the removal of the $7,500 tax credit for U.S. EV buyers. While it may cause a temporary spike in sales for Tesla in Q3, demand is expected to drop significantly for the rest of the year.
The tension didn’t end there. Musk and Trump had an apparent fallout, especially after Musk stepped away from his role in the government and headed back to Tesla.
Despite these ups and downs, Tesla shares have thankfully climbed back from their lows earlier this year. Supporters of Musk in the Wall Street crowd emphasize that the company’s true worth will closely rely on its advancements in self-driving tech and robotaxi projects.
Musk’s Salary Proposal Worth Trillions?
In related news, Tesla has rolled out a new compensation package for Musk that potentially could land him additional stock options worth an incredible $1 trillion if the company reaches certain sales and valuation benchmarks.
However, it’s key to note that Musk won’t snag any extra shares or income from Tesla unless there’s been a jump of over 50% in its stock, reaching a market cap of $2 trillion; right now, the market cap sits at $1.3 trillion. Following the announcement of the pay package, Tesla’s shares leapt by 13% last week.
In a proxy statement, Tesla’s board highlighted the need to keep Musk’s focus firmly on the company, especially considering his responsibilities beyond Tesla, including SpaceX and xAI— the artificial intelligence venture that holds the social media site X, which Musk bought for $44 billion back in 2022. Musk also continues to engage in politics despite cutting ties with Trump, even hinting at forming a new political party, though specifics remain vague.
Musk draws numerous criticisms tied not only to his political inclinations and polarizing social media activity but also regarding the influence he gains from his substantial wealth. Recently, Pope Leo XIV pointed out that eye-popping CEO pay, particularly Musk’s situation and the proposed pay package, signifies the income inequality causing societal polarization.
“What does that mean? If that’s all we find valuable, we’re facing serious issues,” he shared in a Sunday interview with Elise Allen from Catholic news site Crux.
The recent stock buy saw Musk adding about 2.6 million more Tesla shares to his collection, but overall, his ownership stake barely budged, increasing by less than 1%. Musk owns about 413 million Tesla shares, accounting for 12.8% of the company.
But he’s keen on having at least 25% control of the company he leads. He’s even signaled that he might shift some of his AI initiatives from Tesla to xAI if he can’t achieve that control.
“I’m uneasy about pushing Tesla as a leader in AI and robotics without having roughly 25% voting power. Enough to influence, but not so much that I can’t be overruled,” Musk posted on X back in January 2024. “If it can’t happen, I’d rather create products outside of Tesla.”
Note: This article has been updated to include additional details.
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