Elon Musk has a tax bill of more than $15 billion. That is a lot of money. He might have to sell his Tesla stock this year, even if the Twitter vote says no.
Musk asked his 62.7 million followers on Twitter if he should sell 10% of his Tesla holdings. He thinks that people are trying to avoid paying taxes by not selling their stocks, so he is thinking about selling 10% of his stock.
The Tesla CEO said he would “follow the results of this poll” if it was in his favor. The results were 58% for selling and 42% against, so he will sell Tesla shares.
No matter what the results of this poll are, Elon Musk will have to sell millions of shares because he owes more than $15 billion in taxes.
Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.
Do you support this?
— Lorde Edge (@elonmusk) November 6, 2021
Musk has a lot of money because he was awarded shares. He didn’t get a salary or anything else, so his money came from the share price of Tesla. In 2012, he got 22.8 million shares at a price of $6.24 per share, but on Friday, the stock was worth $1,222.09, and it means that he made an extra $28 billion from those shares!
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The company has recently said that Musk has taken out loans from the bank with his shares as collateral. With the sales, he might want to pay off some of those loans.
Tesla made a statement in their third-quarter SEC filing. They said, “If the price of our common stock were to decline substantially, Elon Musk might need to sell some of his Tesla stock to pay back a loan. He can’t do it any other way. If this happens, the price might go lower because he would have sold some stocks.
The options will run out in August of next year. We can exercise them, but Musk has to pay if he wants to make money from them. The options are taxed as employee benefits and will be taxed at 37% plus the 3.8% top tax rate on investment income for those with high incomes. He also has to pay the 13.3% top tax rate in California because he was a resident of that state when he received and exercised the options.
If you add the state and federal tax rate, it will be 54.1%. So the total tax bill on his options, with today’s price, will be $15 billion.
Musk said that he doesn’t take a cash salary or bonus from anywhere. He only has stock, so the only way for him to pay taxes is if he sells some of his shares.
CEOs can only sell their stock when they are allowed to. They want to do the sell at several different times. That is why analysts and tax experts think that Elon Musk will start selling his stock in the fourth quarter of 2021.
In September, Musk said that he has a bunch of options that will expire in Q4. Musk needs to sell them before they expire, or else they’ll go away.
Musk has already pledged 92 million shares to lenders. He can borrow more money against his Tesla shares. They are worth over $200 billion. But he said, “Stocks don’t always go up.”
Musk is getting more options than what was given to him. Musk got an award of 101.3 million stock options in 12 different tranches (it depends on the milestones he has reached).