Elon Musk buys $1.3 billion worth of Tesla shares, sending stock up for 2025

NEW YORK – Mr Elon Musk responded to an unprecedented pay proposal from Tesla’s board by buying about US$1 billion (S$1.3 billion) worth of shares, sending the carmaker’s stock soaring into positive territory for 2025.

The billionaire bought the shares indirectly through a revocable trust on Sept 12, according to a regulatory filing released on Sept 15.

The purchase coincided with Tesla chairwoman Robyn Denholm speaking to reporters about the merits of awarding Mr Musk around US$1 trillion worth of stock if the company achieves a series of ambitious market value and performance milestones.

Tesla’s shares jumped 6.4 per cent in early trading on Sept 15 in New York, before closing up 3.6 per cent at US$410.26, topping its closing price of 2024 by more than US$6. It was up 85 per cent since bottoming for the year at US$221.86 on April 4. 

Mr Musk, 54, last bought Tesla stock in the open market in February 2020, according to data compiled by Bloomberg. The chief executive offloaded more than US$20 billion of the company’s shares in 2022, the year he acquired Twitter.

The purchase arguably amounts to a show of confidence in Tesla’s prospects after a challenging first half of the year, in which vehicle sales slumped 13 per cent worldwide.

While Mr Musk has talked up Tesla’s pursuit of robotaxis and humanoid robots, he has also cautioned that the company could be in for “a few rough quarters” after the US phases out electric-car purchase incentives at the end of September.

It is a bullish indicator for those who believe Tesla’s Optimus robots can be deployed in large numbers fairly soon, said Mr Dmitry Shlyapnikov, an analyst at Horizon Investments who works with portfolio managers.

“If you are a little more sceptical about Tesla’s robotics endeavours, this is simply Elon buying shares to indicate his commitment to the company so that the recently proposed pay package gets approved,” he said. 

Tesla’s car business has continued to show signs of strain, with market researcher Cox Automotive estimating that its share of the US electric vehicle market slipped below 40 per cent in August. Registrations also kept slumping in August in major markets across Europe, and vehicle shipments from the company’s Shanghai factory dropped in both July and August.

Meanwhile, Tesla’s price-to-earnings ratio – a metric that investors use to gauge how expensive a stock is – has soared as profit expectations sank.

Tesla shares currently trade at about 186 times forward 12-month earnings, compared with the S&P 500’s average of 23 times. Even a group of the seven biggest US technology stocks – which include Tesla – trades at an average of 30 times.

“There’s an increasing disconnect between the stock price and what we see as the earnings estimate trajectory,” said CFRA analyst Garrett Nelson.

“A lot of investors are really taking a long-term view of the story and sort of continuing to give the company a pass on some pretty major near-term headwinds.”

Ms Denholm, who has been chairwoman of Tesla’s board since 2018, called Mr Musk a “generational leader” in a Sept 12 interview with Bloomberg Television.

She downplayed concerns that Mr Musk’s political activity has hurt the company’s performance and suggested he has wide latitude in this regard going forward.

The following day, Mr Musk made a remote appearance at a London march organised by the far-right agitator known as Tommy Robinson. The billionaire predicted that “violence is coming” to Britain and told rally-goers: “You either fight back, or you die.”

A spokesman for British Prime Minister Keir Starmer called Mr Musk’s language inflammatory and dangerous.

Mr Musk is the world’s richest person, with a net worth of about US$419 billion, according to the Bloomberg Billionaires Index. BLOOMBERG