The Real Reason this Texas Billionaire is Selling His Stock

Tom Handy
Elon Musk

Austin-based Elon Musk went to Twitter last week to poll his Twitter followers if he should sell his Tesla stock. His 63 million followers voted he should sell 10% of the stock he owns which caused the price of Tesla stock to fall on Monday morning.

What Elon Musk didn’t say was he owed taxes on Tesla stock options. CNBC reported that Musk has a $15 billion tax bill.

“Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.”

When Musk made the Twitter poll, he would “abide by the results of this poll, whichever way it goes.”

The poll showed 58% were in favor and 42% were against Musk selling his stock options.

Musk probably already planned to sell the stock options to pay the tax bill. Musk doesn’t take a salary from Tesla.
TeslaPhoto by Alexander Shatov on Unsplash

How Elon Musk received the stock options

In 2012, Elon Musk was awarded options as part of a compensation plan. Musk doesn’t take a salary or cash bonus, so his wealth comes from stock awards and the gains in Tesla’s share price. Tesla (ticker TSLA) is currently priced at $1,184.98 at the time of this writing.

Musk was awarded 22.8 million shares at a price of $6.24 per share in 2012. As of Friday, Tesla shares closed at $1,222.09, meaning his gain on the shares totals just under $28 billion according to CNBC.

Tesla disclosed Musk has taken out loans using his shares as collateral. With the stock sales, Musk may want to repay some of those loan obligations.

Tesla noted in its third-quarter Securities and Exchange Commission 10-Q filing this year: “If the price of our common stock were to decline substantially, Mr. Musk may be forced by one or more of the banking institutions to sell shares of Tesla common stock to satisfy his loan obligations if he could not do so through other means. Any such sales could cause the price of our common stock to decline further.”

The options are set to expire in 2022. Musk will be taxed at top ordinary-income levels, or 37% plus the 3.8% net investment tax. Since the stock options were granted in California, he will also have to pay the 13.3% top tax rate where he was a California resident.

Elon Musk’s Tesla stock tweet comes after Congress proposed the billionaire tax plan.

Do you think Elon Musk knew what he was doing before he made the Tesla stock sale tweet?

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