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Nov 11, 2021

Elon Musk sells US$5B of Tesla stock as tax debate rages

First Look With Surveillance: Inflation, Musk Sells


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Tesla Inc. Chief Executive Officer Elon Musk unloaded US$5 billion of stock in the electric-car maker, shortly after fueling a social media debate over the tax treatment of billionaires’ shareholdings.

The world’s richest person has disposed of more than 4.5 million shares so far this week, according to regulatory filings. Those were his first sales in more than five years.

Musk, who frequently stokes controversy on Twitter, created a firestorm over the weekend with a survey asking whether he should sell part of his Tesla stake. While he portrayed his proposal as having to do with debate over the ultra-wealthy avoiding taxes, the filings released Wednesday show some of the transactions were pre-arranged in mid-September -- weeks before the poll. He also didn’t mention in the tweets that he has millions of stock options that must be exercised before next August, when they expire.

The headline-grabbing referendum resulted in a decisive vote for Musk to sell, sending the stock tumbling over Monday and Tuesday, and wiping US$50 billion from Musk’s net worth. On Thursday, Tesla shares slipped 0.4 per cent to US$1,063.51, bringing this week’s decline to 13 per cent.

Tesla fell after a Twitter poll about whether Elon Musk should sell shares
On Monday, Musk offloaded about US$1.1 billion worth of stock to pay income taxes on equity options that he also exercised that day under a pre-arranged plan, two of the filings showed. On Tuesday and Wednesday, he carried out the remaining sales. The filings detailing those disposals didn’t indicate that they were pre-planned.

The documents shed no light on whether Musk’s weekend Twitter poll had any bearing on his decision to carry out some or all of the transactions -- or whether he’ll keep selling until he’s met the 10 per cent threshold. To get there, he’d have to get rid of roughly 17 million shares, and even more if he also includes exercisable options in his total holdings.

The options Musk exercised came from a big award he received in 2012. Taxes on such transactions are usually covered by immediately disposing of some of the newly acquired shares. Earlier this year, Musk said publicly that he likely would exercise options earned from the 2012 award in the near future.

It’s possible that the option exercises and related sales would have been executed regardless of the poll’s outcome, given that they were made under the pre-arranged plan. But the terms of such plans aren’t subject to public disclosure, and executives have wide latitude to cancel or modify them at any time.

A regulatory filing from this week said that the billionaire still has 21.6 million exercisable options remaining from the 2012 award. Disclosures in past Tesla filings, though, indicate that Musk would have only about 20.7 million exercisable contracts remaining after Monday’s transaction. Whatever the case, all will need to be exercised at some point before next August, or they’ll expire.

The billionaire last sold shares in 2016, when he exercised options and liquidated some of the newly acquired stock to cover about US$590 million of income taxes.

In his Nov. 6 poll announcement, Musk wrote that “much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10 per cent of my Tesla stock.” Almost 58 per cent of the 3.5 million votes were cast in favor of a sale.

Musk, 50, is worth almost US$300 billion, according to the Bloomberg Billionaires Index.

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