Tesla Inc. owner Elon Musk should sell 10% of his stake in the company, according to a Twitter poll.
As per Bloomberg news, around 58% of the 3.5 million Twitter users said they supported such a sale in the poll on Twitter that closed after 2.15 pm on Sunday in New York. The 10 % stake of Musk of 170.5 million shares is valued at $21 billion.
After the poll closed, Musk said in a tweet that he was prepared for any outcome. This tweeting suggested share prices may fall as indicated by the cryptocurrency values of Tesla Shares traded on FTX. The shares were quoted at $1137.60 at 5.20 pm in New York Sunday, around 6.9% lower than Friday’s closing price.
Musk’s long history of tweeting using the crowd reactions among his fans on the social media platform has often aroused Tesla’s interest, constantly pushing the bar with his tongue-in-cheek tweets. Citing recent discussions on how the ultra-rich hoarded unrealized gains to avoid paying taxes, Musk proposed this move in his tweet. Musk does not take any salary but pays taxes on any stock sale that he exercises.
In the past also, Musk’s tweet has moved Tesla share prices, often getting authorities to react. In 2018, Musk decided to get approval from Tesla’s attorney before communicating information that had a material impact on the investors in a settlement with the security regulators. It was not clear whether the attorney approved the Twitter poll.
Signaling Intentions
Dan Ives, an analyst with Wedbush Securities, said that any large-scale insider sale of holdings is viewed negatively; in Tesla’s case, it won’t matter much, keeping Tesla’s story in mind. Demand for shares among retail and institutional investors remained high, according to him. The unorthodox way of getting interested from fans and investors through a poll may not cause much concern.
In a phone interview, Ives said that offloading a 10% stake will probably mean 1.5% to 2 % shares will get added to the float and not significantly move the needle. He believes that Musk using this method would help manage perceptions well and soften the blow.
Tesla’s share price gained 73% in 2021 to $1222.09 on Nov 5, giving it a market capitalization of $1.2 trillion. Musk, the largest shareholder and CEO, can offload equivalent to 80% of the average trading volume of Tesla in the past three months. This can go up if he includes his options in the potential sale.
Personal Fortune
According to Bloomberg Billionaires Index, Musk’s net worth is $338 billion. This consists of about 25% in stock options that he can exercise at any time. These securities were awarded to him in 2012 and 2018. If he sold all his stock options now, it would fetch him $95.9 billion excluding taxes.
Musk could be signaling that he wants liquidity beyond the cash he raised with borrowings against his holdings in Tesla. He suggested last week that he can sell some of his stocks if Tesla UN can prove that $6 billion will suffice to end global hunger.
For many years, Musk had said that he would be the last person to sell his stock and maintained this position not to dilute his stake whenever Tesla raised money from wall street.
Tax position
In late 2020, Musk moved to Texas that has no personal income tax levied by the state. Musk has become a symbol of inequality with the Tesla share price rising exponentially, and he is sensitive to this perception. The Pro Publica investigation mentioned him in the list of Billionaires who avoid paying taxes. Members of Congress pushing for billionaire tax have targeted Musk.
Ron Wyden, a U.S. Senator from Oregon Democrat in a tweet, said “The world’s wealthiest man should not depend on a Twitter poll whether he pays taxes or not, it is time for Billionaires Income Tax.“
Musk has made many of his employees, investors, and fans millionaires while becoming the world’s wealthiest person. One of his Singapore-based investors, Leo Ko Guan, became a billionaire with an incredible $7 billion in Tesla Shares. Counting Ko Guan among the Twitter followers who believe that it is time for Musk to take out some money from the automaker even if it is to use in his other ventures exploring neural and space networks. KO Guan posted on Nov 6 that Musk, who is cash poor from the tax point of view, should sell his stake, pay taxes and become cash-rich.
