Elon Musk May Keep Selling Tesla, With or Without Twitter: MLIV Pulse

Investors expect Elon Musk to sell more shares of his electric carmaker Tesla Inc. by the end of 2022, according to the latest MLIV Pulse survey.

Elon Musk (AFP)

Investors expect Elon Musk to sell more shares of his electric carmaker Tesla Inc. by the end of 2022, according to the latest MLIV Pulse survey.

About 75% of 1,562 respondents, who include portfolio managers and retail traders, say Musk won't end up owning Twitter Inc. -- a deal that led him to offload about $8.5 billion of Tesla shares in April. A third of respondents predict he will settle with the social-media company for more than $1 billion rather than seeing through his $44 billion takeover at $54.20 per share, while 27% think a judge will order him to pay the $1 billion breakup fee.

“Elon Musk will likely sell shares regardless of what happens with the Twitter deal,” said Mike Loukas, chief executive officer of TrueMark Investments, echoing the sentiment of 68% of those surveyed. “But if investors read too much into it, they're likely not seeing the forest through the trees.”

That could signal further pain for Tesla stock, which is down about 16% this year, more than the 13.3% decline in the S&P 500. The Austin-based company has been roiled by supply-chain shortages, Covid-related lockdowns in China, and confusion surrounding Musk's pursuit of Twitter.

Musk, 51, is the world's richest person, with a $260 billion fortune derived largely from his stake in Tesla. But he's been shedding shares as of late: He conducted a Twitter poll in November about selling 10% of his position, then proceeded to sell more than 15 million shares over the next couple of months.

Musk offloaded about 9.4 million Tesla shares in April after his deal to buy Twitter, amounting to $25 billion worth of stock sold in the span of six months. He's now attempting to back out of the agreement, which will be the subject of a fast-tracked October trial in Delaware Chancery Court.

Resolution Relief

Whatever the outcome, investors expect that Tesla shareholders will welcome an end to the matter.

“If his stock sale is accompanied by a definitive agreement that puts the Twitter mess behind him, Tesla could rally,” said Steve Sosnick, chief strategist at Interactive Brokers. “A definitive end to Twitter would remove a distraction and theoretically allow Musk to focus more on Tesla.”

Read more: Option Bets Rise on Twitter Gains as Musk Legal Battle in Focus

Still, survey respondents are less confident in Tesla's upside relative to four other megacaps in the S&P 500. About a quarter said Microsoft Corp. offered the most potential, roughly the same share as Amazon. com Inc. Alphabet Inc. got 21% of the vote while Apple Inc. received 18%. Tesla came in last, with 12.5%.

The threat of competition for electric vehicles looms large, with most global automakers working on their own EVs. The macro backdrop is also challenging, with the US economy shrinking for two straight quarters.

Those wider concerns were on the minds of the investors who responded to the survey, resulting in a cautious note. They expect value stocks to perform better than growth shares over the next six months, though the largest technology companies are more likely than not to post at least modest gains from here through year-end.

“Any tech monopoly is going to be a flight for safety,” Alex Moazed, the chief executive officer of Applico, said in a Bloomberg TV interview. “Investors want to put their money in the less risky places that can still grow.”

As for Musk, his time atop the Bloomberg Billionaires Index may be short-lived. After taking the No. 1 spot last year after Tesla's huge rally, just over 50% of respondents say he will lose that position by the end of 2023. By comparison, almost 33% say he'll hold on until 2025 or later.

Grace Capital's Cate Faddis and Loup Ventures' Gene Munster will take your questions in our live blog, MLIV Pulse Q&A: Musk, Tesla and Twitter. Tune in on Aug. 2 at 10 a.m. New York time, and send advance questions to TOPLive@bloomberg.net.