Elon Musk said he would sell 10% of his stake in Tesla Inc (NASDAQ:TSLA) to pay the ‘billionaires tax’ after more than 3.5mln people backed this outcome in a Twitter poll.
In the poll, which was launched on Saturday (embed the poll), 58% voted in favour of Musk selling a 10% stake.
This would be worth almost £16bn of the electric carmaker’s stock, based on Friday’s closing price.
Musk vowed in a Tweet to obey the poll’s results but is yet to speak publicly on the outcome of the poll, or the details of the offloading.
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
I will abide by the results of this poll, whichever way it goes
— Lorde Edge (@elonmusk) November 6, 2021
The poll was set up in response to a proposition by the US Democrats for the country's 700 or so billionaires would be taxed on unrealised gains when their stock price rises, even without offloading any of their stock.
It was well known that Musk, who owns 23% of Tesla, had a big tax bill coming due from his 23mln stock options awarded in 2012 that have vested and expire in August 2022, so analysts at broker Wedbush said he has been expected to sell a 5-6% of his shares before the year's end.
With a tax bill calculated at north of US$10bn, the broker said that selling stock over the coming months "is not a surprise, although holding a Twitter poll to sell 10% of his stock is another bizarre soap opera that can only happen to one company and one CEO in the world".
Under his stock options deal with Tesla, Musk can buy almost 23mln Tesla shares at US$6.24 each – a minuscule fraction of its US$1022 share price on 8 November – any time before August 2022 when a ten-year window on share options is coming to a close.
Prior to Musk’s tweet, the billionaire said on Saturday that he has no income on which to pay taxes as he does not take any salary or bonuses from any of his companies.
Last month, Musk promised to sell US$6bn of his Tesla stock and donate it to the UN World Food Programme (WFP) if they could outline “exactly how US$6bn will solve world hunger,” following from the UN head’s statement that 2% of Elon’s wealth could hugely help fight world hunger.
A 10% sale would be higher than expected, Wedbush said, but is ultimately "a digestible number we are not overly concerned about. We would rather Musk rip the band-aid off now and sell this portion of stock rather than it lingering over the next year and feeding into any non-fundamental bear thesis".
A popular approach amongst CEOs when disposing of extreme shareholdings is to disperse the sale over a lengthy duration, known as ‘blind’ sales, to dodge insider trading accusations.