Elon Musk may sell $21 billion Tesla stock after Twitter poll says ‘Yes’; analysts warn of share price fall

This Twitter poll may turn out to be worth a whopping $21 billion, leading to the world’s richest person Elon Musk selling 10% from his Tesla shares

elon musk
Today, Tesla shares will open for trade for the first time following Elon Musk's Twitter poll result. (File)

This Twitter poll may turn out to be worth a whopping $21 billion, leading to the world’s richest person Elon Musk selling 10% from his Tesla shares. About 58 per cent of respondents voted ‘Yes’ to Elon Musk’s Twitter poll, asking users whether he should offload 10% of his Tesla stake. Elon Musk alluded to the ongoing discourse about taxes on unrealised gains, adding that the only way he could pay taxes is by selling the stock. After the voting ended, Musk said “I was prepared to accept either outcome”.

Today, Tesla shares will open for trade for the first time following Elon Musk’s Twitter poll result. According to Reuters calculations, Elon Musk holds 170.5 million Tesla shares as of 30 June 2021, and selling 10 per cent would be worth close to $21 billion based on Friday’s closing price.

Will Tesla stock fall when it opens for trade today?

In a Twitter thread, Frank Holmes, CEO & CIO of USFunds, cautioned about the fall in the Tesla stock. Holmes also warned that taxing the unrealized gains could trigger a stock market crash or stifle long-term equity investing. “Success is penalized plus harmed which would change risk-taking and capital formation,” he added.

Tesla stock nearly doubles in 6 months

In the previous session, Tesla shares ended 0.64 per cent down at $1222.09. As of 8 November 2021, Tesla’s famed CEO Elon Musk stood at first place with $338 billion net worth. In the last one month, Tesla shares have rallied 56 per cent, while on a six months basis, it has nearly doubled, surging 95 per cent. So far this year, Tesla Inc has rallied 67.46 per cent to $1,222.09.

In the same replies thread, Peter Schiff, Chief Economist & Global Strategist, Europac, said that from a diversification and valuation perspective the sale makes a lot of sense. “The fact that you’ll have to pay taxes on the proceeds however is not a net benefit to society,” Schiff said. He added saying that the public would be better served if Musk wisely invests that money rather than the government wasting it.

Elon Musk, the world’s richest person, tweeted: ‘Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock’. In the subsequent tweet, Musk added saying that he will abide by the results of this poll, whichever way it goes, and would offload 10 per cent of his Tesla stock if users approved the proposal. Musk also added that he does not take cash salary or bonus from anywhere, and only has stock. Therefore, the only way for him to pay taxes personally is to sell stock.

US Senator from Oregon Ron Wyden, who floated the tax proposal, said: “Whether or not the world’s wealthiest man pays any taxes at all shouldn’t depend on the results of a Twitter poll.”It’s time for the Billionaires Income Tax.”

Another Twitter user Erik Brynjolfsson, Director Stanford Digital Economy Lab, (who is a professor and author too), said that Elon Musk’s tweet shows how easy it would be for most wealthy people to pay capital gains periodically, the way ordinary wage earners currently pay income tax.

Elon Musk may have to repay some of his loan obligations

In the third-quarter Securities and Exchange Commission (SEC) 10-Q filing this year, Tesla said “If the price of our common stock were to decline substantially, 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”.

In September this year, during a speech on stage at the Code Conference in Beverly Hills, California, Elon Musk had said when his stock options expire at Tesla, his marginal tax rate will be over 50% and that he was already planning to sell soon. “I have a bunch of options that are expiring early next year, so … a huge block of options will sell in Q4 — because I have to or they’ll expire,” CNBC quoted Musk as saying. CNBC also reported that Tesla CEO Elon Musk faces a tax bill of more than $15 billion in the coming months on stock options, making a sale of his Tesla stock this year likely regardless of the Twitter vote.

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