Elon Musk buys $1 billion worth of Tesla shares, a sign that he’s sticking around

By Chris Isidore, CNN

(CNN) — Elon Musk bought $1 billion worth of Tesla shares on Friday, according to a regulatory filing he made early Monday.

The purchase represents a rare action – by Musk or any other CEO. Few business leaders using their own money to buy their company’s stock without exercising of options.

Tesla investors viewed Musk’s stock purchase as a vote of confidence in the company and a further commitment by Musk to stay at Tesla. The news lifted shares of Tesla (TSLA) 8% premarket.

“It’s a huge vote of confidence from Musk and the bulls love seeing this,” said Dan Ives tech analyst with Wedbush Securities and one of the bigger fans of Tesla on Wall Street. “It sends a positive signal after a very tumultuous year for Musk and Tesla shareholders.”

A roller coaster year for Tesla shares

Shares of Tesla nearly doubled after the election, as investors bet that Musk’s close ties to then President-elect Donald Trump would help the company’s financial outlook, particularly its plans to focus on self-driving cars and developing a fleet of robotaxis. But after reaching a record high in mid-December, shares started to slide sharply. By April, it had lost all of its post-election gains and was sharply lower for the year.

As Musk became active in running the Trump administration’s Department of Government Efficiency, the company started facing backlash from those who opposed Trump and his agenda. Sales of Tesla posted their largest drops in history in both the first and again in the second quarter, and profits plunged along with it.

Beyond any political backlash hurting sales, it is also facing increased competition from the EV offerings of other automakers, particularly in China. Chinese automaker BYD is set to pass it for the title of the world’s largest maker of EVs despite it not being in the US market.

Tesla and other automakers now face an end of a $7,500 tax credit for US buyers of EVs as of the end of this month. While that is expected to lift third quarter Tesla sales, the EV company is likely to see a sharp drop in sales in the rest of the year. It also no longer is likely to get billions from other automakers who had bought regulatory credits if they did not comply with emission rules for their gasoline-powered car sales. The financial penalty for those emission violations were also dropped in legislation pushed by the Trump administration this summer.

Musk also had a falling out with Trump, as he left his role in the administration and returned to Tesla.

But Tesla shares have climbed off their lows of earlier this year, and Musk and Tesla’s fans on Wall Street stressed that the future value of company was tied to its self-driving technology and plans for robotaxis. If the premarket gains hold during trading Monday, it will be in positive territory for the yearly, although far behind the larger gains for the broader market.

Pay package could be worth $1 trillion

Last week, Tesla proposed a new pay package for Musk that could grant him additional stock options that could be worth $1 trillion should Tesla achieve certain sales and valuation milestones. But Musk would get no additional shares and no income from Tesla unless its stock increases by more than 50% to a market cap of $2 trillion, from its current value of $1.3 trillion. Shares of Tesla increased 13% through Friday’s close since the pay package was unveiled.

Tesla’s board, in its proxy statement last week, spoke of the importance of keeping Musk focused on Tesla going forward. He is also CEO of rocket company SpaceX, artificial intelligence company xAI, which also owns social media platform X that he purchased for $44 billion in 2022, and several other companies. In addition to his many business interests, he remains active in politics, despite his falling out with Trump. He has announced plans to form a third political party, but his plans for the so-called America party remain murky.

Musk’s stock purchase that he announced Monday brought an additional 2.6 million additional shares of Tesla into Musk’s portfolio. But it barely increased his stake in the company on a percentage base: His holdings of Tesla shares increased by less than 1%.

Musk has purchased blocks of Tesla shares on the open market in the past, but most of his purchases came from exercising his stock options that he received as compensation. The 413 million shares of Tesla he now owns represents 12.8% of the company’s shares.

But Musk has said he wants to control at least 25% of the company. He has threatened to shift some of his AI efforts away from Tesla to xAI without more control.

“I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned,” Musk wrote in a post on X in January 2024. “Unless that is the case, I would prefer to build products outside of Tesla.”

In addition to his current shares of Tesla Musk had options to buy an additional 304 million shares of Tesla granted under a 2018 pay package, but that pay package was struck down twice by a judge in Delaware as excessive and unfair to other shareholders. Tesla continues to appeal that decision. Should he eventually be granted and exercises those options he would control more than 18% of the company without the new proposed pay package.

For several years, Musk’s holdings in Tesla and other companies made him the richest person on the planet, although he briefly lost that title to Oracle cofounder Larry Ellison, a former Tesla board member and shareholder. Strong earnings by Oracle last week lifted its shares and Ellison’s net worth estimated by Bloomberg jumped $89 billion to $383.2 billion. But Musk quickly took the title back and he was worth $419 billion as of Monday, according to the index.

This story has been updated with additional reporting and context.

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