Tesla CEO Elon Musk said Saturday that the way he went about liquidating around $7 billion USD worth of Tesla stock this week was “closer to tax maximization than minimization.”
Musk was responding to a Twitter user who asserted the CEO would benefit more financially from exercising options and selling the common stock he already owns instead of outright selling a portion of his stock options.
How is it incorrect to say he will end up with more shares? If i’m reading your spreadsheet correctly, your own analysis shows an increase in the number of shares held.
— Whole Mars Catalog (@WholeMarsBlog) November 13, 2021
“A careful observer would note that my (low basis) share sale rate significantly exceeds my 10b (high basis) option exercise rate, thus closer to tax maximization than minimization,” Musk said in a tweet.
A careful observer would note that my (low basis) share sale rate significantly exceeds my 10b (high basis) option exercise rate, thus closer to tax maximization than minimization.
— Elon Musk (@elonmusk) November 13, 2021
Musk had previously said he would have to exercise a large number of stock options this year, which would create a big tax bill. With almost all of his wealth tied up in his Tesla holdings, selling some of his stock to pay the taxes was pretty much the only possibility.
Last week, Musk asked on Twitter if he should sell 10% of his holdings in Tesla to settle his upcoming tax bill. The majority of participants responded in the affirmative.
As of Friday, Musk and his trust have sold around $6.9 billion USD worth of shares in the electric car company, which last month hit $1 trillion USD in market capitalization for the first time ever. With Musk dumping large amounts of Tesla stock, the company’s share price has dropped 10% week-to-date.
There are several different ways Musk could have gone about selling a portion of his shares in Tesla, some of which would have (legally) minimized his tax obligations.
By selling common stock that he already owns, however, Musk will have to pay 23.8% tax on shares sold, on top of his existing tax bill for the stock options that he has to exercise. Thus, his strategy is “closer to tax maximization than minimization,” where most wealthy individuals would have gone the opposite direction.
Dave Lee, longtime Tesla investor and YouTuber, noted that it’s “possible he’s selling existing common shares to increase the taxes he’s giving to the government.”
“Would be kind of crazy but something Elon might do,” he added.
On Sunday morning, Musk responded to U.S. Senator Bernie Sanders, in regards to the latter saying on Saturday, “we must demand that the extremely wealthy pay their fair share. Period.”
That’s when Musk replied to the Sanders, “I keep forgetting that you’re still alive,” followed by “want me to sell more stock, Bernie? Just say the word…”
I keep forgetting that you’re still alive
— Elon Musk (@elonmusk) November 14, 2021
Want me to sell more stock, Bernie? Just say the word …
— Elon Musk (@elonmusk) November 14, 2021
Back in March, Sanders was critical of Musk and SpaceX, saying, “space travel is an exciting idea, but right now we need to focus on Earth and create a progressive tax system so that children don’t go hungry, people are not homeless and all Americans have healthcare. The level of inequality in America is obscene and a threat to our democracy.”
Clearly, Musk has not forgotten the shots taken by Sanders in the past and fired back on Sunday morning.
Space travel is an exciting idea, but right now we need to focus on Earth and create a progressive tax system so that children don't go hungry, people are not homeless and all Americans have healthcare. The level of inequality in America is obscene and a threat to our democracy. https://t.co/CbMWYnPFUx
— Bernie Sanders (@BernieSanders) March 21, 2021
https://twitter.com/ppathole/status/1459921640637145090?s=21
