Elon Musk, the CEO of Tesla, made a significant move last Friday by investing $1 billion to purchase 2.57 million shares of Tesla stock. As a result, Tesla’s stock soared on Monday morning to $416.50 per share.
Traders view this as a major internal buy-in and a vote of confidence in the future of the company by the outspoken CEO himself. According to data from Verity, Musk rarely makes such acquisitions. His last buy-in was on February 14, 2020, when he bought around 200,000 shares worth approximately $10 million. Verity notes that this transaction marks Musk’s largest buy-in to date.
Earlier this month, Tesla announced that the board had devised a new compensation plan for Musk. If the company achieves various ambitious milestones, Musk could potentially earn up to $1 trillion in stock over the next 10 years. This plan is set to be voted on by shareholders in November. Prior to this recent purchase, Musk held approximately 13% of Tesla shares.
This year, Tesla’s stock price has been affected by declining sales, partly due to Musk’s involvement in politics and the Trump administration cutting back on electric vehicle incentives. The company saw a 71% drop in profits in the first quarter and a 16% decrease in the second quarter.
According to Tipranks.com, Wall Street analysts have mixed opinions on Tesla’s future prospects. While many believe that its target price could drop by about 20% from current levels, there are also numerous optimists who have a positive outlook on Tesla’s long-term growth. They believe that Musk can successfully lead the company’s transition towards focusing on autonomous driving, artificial intelligence, and robotics technology.
Dan Ives, the Global Technology Research Director at Wedbush, stated that for Tesla bulls, this internal buy-in serves as a huge vote of confidence, indicating that Musk is doubling down on Tesla’s AI efforts. Musk has spoken multiple times about Tesla’s future plans, especially in the autonomous driving ride-sharing business. However, he has also cautioned that the U.S. government’s electric vehicle incentives are set to expire later in September, potentially leading Tesla to face “several tough quarters.”