Musk can keep selling Tesla, with or without Twitter: MLIV Pulse

(Bloomberg) — Investors expect Elon Musk to sell more shares of electric car maker Tesla Inc. by the end of 2022, according to the latest MLIV Pulse survey.

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About 75% of the 1,562 respondents, which include portfolio managers and retailers, say Musk will not end up owning Twitter Inc. — a deal that saw him offload about $8.5 billion of Tesla stock in April. A third of respondents predict he will settle with the social media company for more than $1 billion rather than see its $44 billion takeover at $54.20 a share, while 27 percent think a judge will order him to to pay the $1 billion breakup fee.

Musk will likely sell shares regardless of what happens with the Twitter deal,” said Mike Lucas, chief executive of TrueMark Investments, echoing the view of 68% of respondents. “But if investors read too much into it, they probably won’t see the forest through the trees.”

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

Musk, 51, is the world’s richest man, with a fortune of $260 billion that comes largely from his Tesla stake. But he’s been losing shares lately: He ran a Twitter poll in November about selling 10 percent of his position, then went on to sell more than 15 million shares over the next two months.

Musk unloaded about 9.4 million Tesla shares in April after his $25 billion deal to buy Twitter sold over six months. It is now trying to get out of the deal, which will be the subject of a fast-track trial in October in Delaware Court.

Resolution Relief

Whatever the outcome, investors expect Tesla shareholders to welcome the end of the matter.

“If its stock sale is accompanied by a definitive deal that puts the Twitter chaos behind it, Tesla could rise,” said Steve Sosnick, chief strategist at Interactive Brokers. “A permanent end to Twitter would remove a distraction and theoretically allow Musk to focus more on Tesla.”

Read More: Pick Bets Rise on Twitter Win as Musk Legal Battle in Focus

But survey respondents are less confident about Tesla’s upside than four other megacaps in the S&P 500. About a quarter said Microsoft Corp. offered the most features, about 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 is high, with most global automakers working on their own EVs. The macroeconomic backdrop is also challenging, with the US economy contracting for two straight quarters.

These broader concerns were on the minds of investors who responded to the survey, resulting in a cautious note. They expect value stocks to outperform growth stocks over the next six months, though larger tech companies are more likely to post at least moderate gains between now and the end of the year.

“Any technology monopoly is going to be a safety net,” Alex Moazed, chief executive of Applico, told Bloomberg in an interview. “Investors want to put their money in less risky places that can still grow.”

As for Musk, his time at the top of the Bloomberg Billionaires Index may be short-lived. After taking the No. 1 spot last year after Tesla’s massive rally, just over 50% of respondents say it will lose that spot by the end of 2023. By comparison, nearly 33% say it will hold until 2025 or later.

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

Subscribe to MLIV Surveys at NSUB MLIVPULSE.

(Adds story tout to Twitter picks after the eighth paragraph.)

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