Elon Musk on Saturday asked his 62.5 million Twitter followers to decide the future of a large portion of his Tesla holdings.
However, Twitter polls are unofficial, and Musk has previously said he is likely to sell a “huge batch” of his options in the fourth quarter.
In his appearance at Code’s conference in September, Musk said that when his Tesla stock options expire, his marginal tax rate will be more than 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 batch of options will be sold in the fourth quarter — because I have to or they will expire,” Musk said at the conference.
Other current and former Tesla board members, including Robyn Denholm, Kimbal Musk, Ira Ehrenpreis and Antonio Gracias, have sold hundreds of millions of dollars worth of Tesla stock since Oct. 28, as the company’s shares soared.
Stocks jumped after Tesla’s record third quarter, and car rental company Hertz’ announcement that it had ordered 100,000 Tesla vehicles for its fleet. Musk waited a week after Hertz’s announcement to clarify that Tesla had not signed a contract with the car rental company yet. Before making that statement, he mocked investors who had been shorting Tesla stocks on Twitter, writing: “Tesla Hertz shorts.”
Since the Hertz announcement, Tesla’s shares are up about 34% and so has Elon Musk’s net worth.
According to InsiderScore Research Director Ben Silverman, Tesla had just over 1 billion shares outstanding as of late October. If Musk exercised his options today, the number of shares outstanding would increase by just over 2%, according to an InsiderScore calculation. Silverman expects the impact on shareholders to be minimal, in part because sales won’t be a surprise.
“Musk will likely continue to talk about what he’s doing — exercising the options because their expiration date is about to expire, selling the shares because of the massive tax bill and because of the liquidity of Tesla stock,” he said.
The Tesla CEO suggested he was actually responding to criticism that he had avoided paying his fair share of taxes, rather than just managing his holdings of options, and asked users on Saturday to decide whether he should own or sell 10% of his stock.
“A lot of unrealized gains have been made lately as a way to avoid taxes, so I’m proposing to sell 10% of my Tesla stock. Do you support that?” He said. Musk has added a poll function, so users can vote “yes” or “no”.
“I will stick with the results of this survey, any way they go,” Musk, one of the world’s richest people, added. It wasn’t immediately clear what this proposed sale might amount to. As of last December, Musk owns approximately 22.4% of the company’s outstanding shares.
Billionaires can take advantage of tax avoidance strategies that are not provided to people whose earnings come from traditional wage income. Excessive wealth often depends to a large extent on the appreciation in the value of shares and real estate which is not considered taxable unless those assets are sold.
Earlier this summer, ProPublica, an investigative news website, published a report on Musk’s tax bill as part of a massive analysis of the financial health of billionaires. The outlet found that Musk’s income tax bill was zero in 2018. Musk later responded, saying the reports were “disingenuous” and “misleading.” He added that the number was very low because he is not paid, so his monetary compensation is close to zero.
“Note, I don’t get a cash salary or bonus anywhere. I only have stock, so the only way for me to pay taxes in person is to sell the stock,” he said on Saturday.
Among his large holdings, Musk has options for 22,862,050 shares at $6.24 set to expire on August 13, 2022. These options were granted to him in 2012.
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