Tesla CEO Elon Musk has been on something of a share selling spree of late, even taking to Twitter to ask his followers whether he should offload 10% of his holding at the beginning of November.
Unsurprisingly, Musk’s poll resulted in some 57.9% of respondents confirming that he should sell his stock, with this equating to around $25 billion in total value and causing something of a stir on the social media site.
But what prompted Musk’s unorthodox action, and why is he so keen on the idea of offloading his Tesla stock at present?
Musk and His Dwindling Tesla Holding
Musk’s Twitter poll garnered more than 3.5 million votes, with a clear majority thinking that he should offload 10% of his shares at the suggested valuation.
This has continued a trend for Musk selling his shares over time, although the unorthodox and high profile way in which the entrepreneur went about advertising the sale was hardly conducive to stable or reliable price growth.
Certainly, Tesla’s price responded negatively to the move, declining by 6% in the 24 hours following the poll, while it remains considerably lower than the $1,229.91 peak achieved at the beginning of November. This was noted by clients active on trading platforms through Oanda, with the value depreciation as sharp as it was sudden.
Interestingly, Musk has sold nearly $5.7 billion worth of shares over the course of the last few days alone, continuing a sustained sell-off that has continued throughout the second half of 2021.
According to US Securities and Exchange Commission filings, this income has been derived from both planned and unplanned sales, with Musk seemingly hell-bent on raising capital in as quick and efficient a manner as possible.
Why is Musk Selling Off His Stock?
The question that remains, of course, is why is Musk so determined to offload his Tesla stock in the current climate?
Well, much has to do with Musk’s receipt of Tesla stock options in 2012, through which he was able to buy 22.8 million shares at just $6.24. These options expire next year, creating a limited window of opportunity for Musk to capitalize on the advantage.
After all, Tesla’s stock is now worth an impressive $1,081.92 per share, so there’s immense profit to be made by cashing in on such options.
Incredibly, the share price is up from just $567.60 during the last 12 months, nearly doubling during this time and showcasing immensely impressive growth.
However, when Musk does cash in on these options, he’ll be legally required to pay the tax difference between the 2012 and 2021 stock prices at a rate of more than 50%. This will create a tax bill of around $15 billion according to CNBC’s Robert Frank, with Musk preparing to pay this by selling shares and raising some rapid liquid capital.
This, coupled with the promise that Congress and the Joe Biden administration will look to hike the tax rate among the wealthiest Americans, may well have inspired Musk to cash in on Tesla’s rising stock while he’s able to.
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