Elon Musk sells over $1.2 billion of Tesla shares after Twitter poll

A document published on Friday (12) shows that Elon Musk sold over 1.2 billion shares of Tesla on Friday (12), at an average price of US$ 1,030 each. That brings the week’s sales to a total of 6.4 million shares, accumulating $6.9 billion.

Still, this amounts to less than 4% of actions that he owns directly, or less than 3% if you include all the options he has to buy additional shares.

A week ago, Musk posted a poll on Twitter asking if he should sell 10% of his holdings as a way to increase his tax liability, and 58% of respondents said yes.

Share sales this week have brought down the value of Tesla’s shares for shareholders – including himself, as Musk is by far the largest shareholder. Tesla shares ended the week down 15.4% to $189.

It is unlikely that Twitter research was the main motivation for the sale. Instead, the businessman faces an impending tax bill that will be triggered by his need to exercise 22.9 million stock options before next August. That bill would be nearly $10 billion at current market prices.

If he does not exercise the options by then, they will expire and he will forfeit the right to buy each share for a mere $6.24. But when he does, the value of the shares at that time will be treated as regular income and he will have to pay a 40.8% federal tax rate. It is also possible that he owes state income tax to the California, which has a maximum rate of 13.3%.

Although he moved to Texas, which has no state income tax, he admitted in a recent publication that he still owes the state of California a sizable income tax based on how long he spends working in the state.

Musk exercised the first block of 2.2 million of these expiring options on Monday (8) and then sold 934 million shares to pay taxes on that exercise.

The shares he has since sold, however, come from his direct holdings, most of which he has owned since the initial public offering (IPO) of 2010 of the company. And Musk owes just 20% long-term capital gains tax on the $5.8 billion proceeds from those stock sales, or about $1.2 billion.

Tesla is still the most valuable automaker in the world, with a market cap greater than the top 12 automakers by volume. Last month, it became the sixth company of the USA to achieve a $1 trillion valuation.

Musk’s participation in the company has decreased a little with these sales, but for now it is still equal to 23.7%, compared to 24.3% he would have without sales.

As of this week, the businessman hasn’t sold any shares in the company he’s held since 2016. But other board members and top executives have been selling shares all the time, including his brother Kimbal Musk, who is a Tesla board member and who sold $US 108 million shares last week, equivalent to about 15% of his shares in the company, just before his brother’s sales began to push down the value of the share.

Elon Musk is the richest person in the world, with a net worth estimated by Bloomberg at $294 billion. The $6.9 billion he earned from this week’s transactions has already been included in that calculation, as the estimated value of stocks and options is a significant part of his net worth. Its equity declined this week as Tesla’s share price plummeted.

The recent share sales do not significantly change Musk’s financial position. The $6.9 billion in sales would be like a typical American family selling about $2,900 worth of stock they already owned. The latest Federal Reserve estimate puts the average household equity at $121,700.

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