Elon Musk may have been forced to sell a sizable portion of his Tesla stock even if he didn’t make an unusual commitment on Twitter over the weekend.
Mr Musk on Saturday polled Twitter users on whether he should sell a 10% stake in his company. The poll appears to be a response to Democrats’ proposal to tax billionaires’ unrealized earnings. “Recently, the majority of unrealized gains have been a means of avoiding taxes, so I propose to sell 10% of my Tesla stock,” he said. tweeted. Mr Musk said he was asking the question because he doesn’t receive a cash salary as Tesla’s chief executive, and so there would be no way to pay a large tax bill without selling some stock. his Tesla shares, which make up most of his wealth.
Mr Musk wrote in a follow-up tweet that he would “follow the results of this poll, whichever way it plays out”.
He ended the poll on Sunday, after nearly 3.5 million votes had been cast, with 58 percent voting for the sale. Mr. Musk has not confirmed what he will do, but after the poll ended, he tweeted, “I’m ready to accept either outcome.”
Either way, Mr. Musk may soon need to sell a large chunk of his stock. He holds nearly 23 million stock options that were awarded in 2012. These options have been granted and expire in August. Most stock grants allow executives to avoid having to pay the bills. pay taxes for years, and perhaps forever, as long as they don’t sell the stock they get from the option conversion.
But Brian Foley, an executive compensation consultant, said given the size of Mr Musk’s funding and the way it was structured, it was likely many of his 2012 picks were not eligible for the incentive. tax. That means Mr Musk will owe income tax on making the allowance, which at current prices is worth just under $30 billion. Musk’s tax bill could be as high as $10 billion, depending on the percentage of options that don’t qualify for the incentive.
“They’re a tax ticking time bomb,” Mr Foley said of Mr Musk’s stock options. “I can’t think of any way he could have managed to pay the taxes.”
Furthermore, Musk may need to sell more shares than he needs to pay his tax bill. He owns 17% of Tesla shares, with its current share price worth about $200 billion. That means his weekend tweets are a pledge to sell about $20 billion worth of Tesla stock.
The potential sale could rattle Tesla’s stock at a time when many analysts say it is already overvalued. The company’s market value recently surpassed the $1 trillion mark, making it just one of five publicly traded U.S. companies with such a high valuation.
However, James Cox, a professor at Duke University law school and an expert in securities law, said it could be difficult for Musk to return to his Twitter pledge. “It’s a no-win situation,” Mr Cox said. “In securities law, the problem is that this could be considered a misleading misrepresentation if another shareholder sold on Musk’s tweet.”
However, Mr. Cox said it would be a tough case to win, because executives are allowed to make statements and change their minds, as long as they mean what they have. speak when they speak.
This is not the first time Musk has gotten in trouble for his tweets. In late 2018, he and Tesla settled a Securities and Exchange Commission lawsuit, pleading not guilty, for tweeting about a potential Tesla sale that never happened. Musk was also sued for defamation in 2018 after calling a diver who helped rescue children trapped in a cave in Thailand a “pedo guy” on Twitter. Mr. Musk won the case.
Daniel Ives, a securities analyst at Wedbush Securities who follows Tesla, called Mr Musk’s latest Twitter engagement “weird”, but said he thinks with Tesla’s outlook and investor enthusiasm investment in the company’s stock, up 67% this year. The recent $1,222, will continue to rise, even as Mr. Musk cashes out a portion of his holdings.
“Musk is likely to sell some of its Tesla shares before the end of the year, but no one would have imagined that a Twitter poll would translate into a sale of 10% of its ownership,” Mr. Ives said. “. “This weekend’s Twitter poll is an odd one even for Elon.”