According to the latest regulatory filings of Wednesday, Elon Musk, the CEO of Tesla, sold $1.1 million shares of Tesla on Monday to help pay taxes on options he received approximately ten years ago. The possibilities he used were around nine percent of those he will need to utilize by August of 2022, or the option to acquire them will expire.
Musk sells $1.1B in Tesla stock
Tesla CEO Elon Musk sold $1.1
billion worth of company stock for tax reasons on Monday, according to financial filings.
The sale amounts to more than 930,000 shares, worth over $1.1 billion, leaving him with over 170 million shares. pic.twitter.com/30B9O1QVIU
— 石原順（西山孝四郎） (@ishiharajun) November 11, 2021
However, exercising those shares of Tesla will bring about a $1 billion federal tax bill, under the highest federal income tax rate of thirty-seven percent, with another 3.8 percent net investment tax on top of that. Likewise, the world’s richest person will also have an unknown amount of state income taxes in California, although he relocated the Tesla facility to Texas, where there is no state income tax. California state has a top state income tax rate of 13.3 percent.
Musk Asked his Fans His Fans if He Should Start to Sell Shares
Previously, Musk conducted a Twitter poll over the weekend and asked his fans if he should start to sell his company shares. He tweeted that he proposes selling ten percent of his Tesla stock. In another tweet, Musk said that he would obey the results of the poll. And the poll suggests that 57.9% people voted ‘Yes’ to sell the stock and 42.1% people voted ‘No.’ in a series of tweets, Musk said he doesn’t take a cash salary or bonus from anywhere, and he only has the stock, the only way to pay taxes personally is to sell stock.
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?
— Elon Musk (@elonmusk) November 6, 2021
Tesla Shares Fell Following the Twitter Poll
Following the Twitter poll of Musk, Tesla shares dropped as some investors took it to mean he proposed to sell more shares than he had expected. On Monday, the share price also fell partly because of the sales of Musk of almost one million shares that took place that day. However, Musk plans only to sell the minimum amount of Tesla shares necessary to pay taxes at the time he exercises many other options.
Tesla shares raised by 1.2 million, the difference between the shares’ numbers Musk attained and the number of shares he sold. Moreover, the shares of Tesla increased 2.7 percent in after-hours trading following the filing. The CEO of Tesla owned a total of 170.5 million shares before this 1transaction, having a worth of $182 billion based on yesterday’s close. Musk made an attractive $2.5 billion profit on the share acquisitions he made since he had only to pay around $6.24 per share to acquire each share under the 2012 option terms, which is what shares of Tesla cost at that time on a split-adjusted basis.
However, $2.5 billion profit is just a small part of his net worth. According to the estimation of Bloomberg, the net worth of Musk is almost $300 billion, which makes him the wealthiest person on Earth. Most of his net worth is his Tesla shares and options to acquire more shares. Tesla became only the sixth company ever in the world to be worth $1 trillion two weeks ago. But Musk is also the primary shareholder and CEO in privately-held SpaceX.
History of Musk Sharing Tesla Shares
It is the 3rd time Musk has sold the shares of Tesla since the company registered on the Nasdaq exchange in 2010. It has been the most significant transaction of the company since then. Musk sold slightly over 1.4 million shares in July 2010 for $24 million. Likewise, in 2016, the billionaire sold 2.7 million Tesla shares for around $593 million. However, Tesla is still worth roughly $1.1 trillion.