Poll Or No Poll, Elon Musk Likely Intends To Sell Tesla Stock In Face of $15B Tax Bill: Report

Tesla Inc TSLA CEO Elon Musk faces a whopping $15 billion tax bill and that may have reportedly prompted him to consider selling some of his holdings in the electric vehicle company.

What Happened: A sale of Tesla stock by Musk is likely regardless of the outcome of a recent Twitter poll held by Musk asking his millions-strong following on the social media website if he should sell 10% of the company’s stock, reported CNBC.

Musk said he would “abide by the results of [the] poll” in which 58% of the respondents were in favor of Musk selling the stock, while 42% voted against such a move.

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

The Tesla CEO does not receive a salary but is instead compensated through stock options as per a plan dating back to 2012.

The 2012 plan awarded Musk 22.8 million shares at a strike price of $6.24 per share; these shares are now worth around $28 billion as Tesla shares closed at $1,222.09 on Friday.

See Also: How To Buy Tesla (TSLA) Shares

Why It Matters: As options are taxed as employee benefit or compensation, a top ordinary income tax rate of 37% plus 3.8% net investment tax is applicable, noted CNBC.

Musk is also liable to pay 13.3% top California tax, as the options were granted while he resided in the golden state.

This brings the combined tax rate at 54.1% and the amount of tax at nearly $15 billion. 

CEOs have a limited window when they can sell shares and since Musk would likely stagger shares over at least two quarters, analysts and experts on taxation have been expecting him to start selling in the fourth quarter, as per CNBC.

“I have a bunch of options that are expiring early next year, so ... a huge block of options will sell in Q4 — because I have to or they’ll expire,” said Musk at his appearance in Code conference in September, as per CNBC.

In June, Musk said he only sells stock “when my stock options are expiring & I have no choice.”

Musk owns 22.4% or 227.13  million shares of Tesla as of Dec. 31, 2020, as per a U.S. Securities and Exchange Commission filing. 

Price Action: Tesla’s tokenized stock on FTX traded 0.96% lower at $1,132.11 at press time. On Friday, Tesla shares closed nearly 0.6% lower at $1,222.09 in the regular session.

Read Next: How Elon Musk's Potential Sale Of 10% Of Tesla Stake Would Impact Stock

Photo: Courtesy of Nvidia Corporation via flickr