Faced With $15 Billion Tax Bill, Elon Musk Is Selling Tesla Stock
Elon Musk is set to sell a tenth of his Tesla Inc (NASDAQ:TSLA) stock as he faces a tax bill of more than $15 billion on stock options in the upcoming months. The richest man on earth created a Twitter poll to ask his 62,7 million followers whether he should make the move, with more than half supporting the idea.
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Upcoming Tax Bill
As reported by CNBC, Musk asserted on the Twitter post: “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.” The results were 58% in favor and 42% against, and Musk said he would “abide by the results of this poll, whichever way it goes.”
Still, the main reason behind the Tesla founder selling part of his holdings in the electric car manufacturer, is an upcoming tax bill of more than $15 billion. According to Reuters, the company shares dipped 7.5% in premarket trading on Monday following the weekend announcement.
CNBC informs that Tesla shares closed at $1,222.09 on Friday, meaning his gain on the shares reaches just short of $28 billion. Reuters estimated that, “As of June 30, Musk’s shareholding in Tesla came to about 170.5 million shares and selling 10% would amount to close to $21 billion based on Friday's close.”
In 2012, Musk was awarded 22.8 million Tesla shares –at a strike price of $6.24 per share– in a compensation deal he struck with the company’s board.”
Repaying Loan Obligations
Musk’s move arrives a few days after U.S. Senate Democrats had proposed a “billionaires tax” to help fund President Joe Biden’s social spending plan –the $2 trillion “Build Back Better” legislation– and address tax avoidance by the U.S. biggest companies.
Tesla recently revealed that Musk “has taken out loans using his shares as collateral, and with the sales, Musk may want to repay some of those loan obligations.”
In its Q3 Securities and Exchange Commission 10-Q filing this year, the company said: “If the price of our common stock were to decline substantially, Mr. 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.”
Tesla is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders’ families.
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