Tesla CEO Elon Musk is facing $ 15 billion in taxes in the coming months, forcing him to sell shares regardless of the results of a Twitter poll, asking if he should sell 10% of the shares he holds in the electric vehicle company, as a proof that he does not use it to evade taxes.
A staggering 3,519,252 users voted in Musk’s poll, with 58% of them voting in favor of the sale and 42% against.
Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.
Do you support this?
— Lorde Edge (@elonmusk) November 6, 2021
Musk said he would “abide by the result of this poll, whatever it is” and that he “does not get paid cash or bonuses out of nowhere. I only have shares, so the only way to pay taxes is to sell shares.”
The share of Tesla fell by up to 7% at the start of pre-conference trading on Monday to pick up its losses close to 1% then.
But according to CNBC, regardless of the poll result, Musk is likely to start selling millions of shares this quarter.
The reason; A looming tax “bill” of more than $ 15 billion for the CEO of Tesla.
Specifically, Musk received an option in 2012 as part of a compensation plan. Because he does not receive a salary or cash bonus, his earnings come from shares and earnings at the price of Tesla. The 2012 assignment involved 22.8 million shares at a price of $ 6.24 per share. Tesla shares closed at $ 1,222.09 on Friday, which means that Elon Musk’s earnings per share totaled just under $ 28 billion.
The company recently revealed that Musk has taken out loans using his shares as collateral, and by selling shares, Musk may want to repay some of his loan obligations.
According to Tesla’s statement to the Securities and Exchange Commission for the third quarter of 2021, “if our share price falls significantly, Mr. Musk may be forced by one or more banking institutions to sell Tesla shares to meet his debt “If it can not do so by other means. Any such sale could cause a further drop in the price of our common stock.”
The options expire in August 2022. However, in order to exercise them, Musk must pay income tax on his earnings. As options are taxed as employee benefit or compensation, they will be taxed at the highest levels of standard income, or 37% plus net investment tax of 3.8%. Musk will also have to pay the maximum tax rate of 13.3% in California, as the options were granted – and mostly won – while he was a California resident.
Combined, the state and federal tax rates will be 54.1%. Thus, the total taxation of his rights, at the current price, will be $ 15 billion.
With CEOs having limited leeway to sell shares and Musk likely wanting to “split” sales in at least two quarters, analysts and tax experts expected Musk to start selling in the fourth quarter of 2021.
Speaking at the Code conference in September, he said: “I have rights that expire early next year, so a huge package of rights will be sold in the fourth quarter – because I have to do it, otherwise they will expire.”
Musk could borrow more money than Tesla shares, which total more than $ 200 billion. However, he has already pledged 92 million shares for cash lending, and as he said at the Code conference: “Shares do not always go up, there is a fall.”
* Musk polls Twitter to ask if he should sell 10% stake in Tesla
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Source From: Capital
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