Wednesday, January 19

Twitter Has Spoken: Musk Should Sell $ 21 Billion In Tesla

Elon Musk’s social media followers have spoken: The head of Tesla Inc. should sell 10% of his stake in the electric car maker.

A majority of 3.5 million Twitter users (58%) said they would support such a sale in a Twitter poll that Musk launched on Saturday and closed shortly after 2:15 p.m. Sunday in New York. The stake would be valued at about $ 21 billion based on the 170.5 million Tesla shares it owns.

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“I was willing to accept either of the two results,” Musk said in a tweet after the poll closed.

A cryptocurrency version of Tesla shares traded on FTX suggests that Musk’s tweets may cause stocks to tumble when Wall Street wakes up on Monday. They were selling $ 1,137.60 around 5:20 p.m. Sunday in New York, down 6.9% from Friday’s close for real stocks.

The crowdsourcing exercise is the latest example in Musk’s long history of using Twitter and his legions of fans on the platform to spark interest in his company, sometimes pushing the envelope with tongue-in-cheek tweets. The world’s richest person proposed the measure in a tweet citing recent discussions about the ultra-wealthy who accumulate unrealized earnings to avoid paying taxes. Musk does not receive a salary, but he does have to pay taxes on the stock options he exercises.

Musk’s tweets have stirred Tesla’s stock in the past, sometimes drawing the ire of authorities. In 2018, Musk agreed to obtain approval from a Tesla attorney before communicating material information to investors as part of a deal with US securities regulators. It was unclear whether that official previewed the survey from Musk’s Twitter.

Signal intentions

While big sales by insiders are often seen as a negative sign, a sale of this size won’t significantly alter Tesla’s story, said Dan Ives, an analyst at Wedbush Securities. Demand for Tesla shares remains high among institutional and retail investors, he said. The unorthodox step of gaining fan and investor buy-in through a survey can also ease any concerns.

“Selling 10% will probably add 1.5% to 2% to the float, so it doesn’t really move the needle significantly,” Ives said in a telephone interview. “I think if I did it this way it would definitely soften the blow and also help perception.”

The automaker’s shares have soared 73% this year to $ 1,222.09 as of Nov. 5, giving it a valuation of $ 1.2 trillion. The number of shares that Musk, its CEO and largest shareholder, could download is equivalent to 80% of Tesla’s average daily transaction volume in the last three months. The number of shares you could potentially sell would be even higher if your options were included.

Tesla shares won’t officially begin trading again until early Monday morning in the US.

Personal fortune

Musk’s fortune stands at $ 338 billion, according to the Bloomberg Billionaires Index. About a quarter of that consists of Tesla stock options that you can exercise at any time. The values ​​come from two grand prizes he received in 2012 and 2018. The oldest contracts expire in August of next year.

If you exercised all the options now and immediately sold the shares, they would bring you $ 95.9 billion before taxes.

Musk may be signaling that he wants liquidity beyond the cash he’s insured by borrowing against his stakes in the electric vehicle maker. Last week he suggested that he would sell some shares if the UN could show that $ 6 billion could help alleviate world hunger. For years, Musk has said he would be the last to sell shares and has often increased his position when Tesla has raised money from Wall Street so that his stake is not diluted.

Fiscal situation

Musk moved to Texas, which has no state personal income tax, in late 2020. But as Tesla’s market value has skyrocketed and his personal wealth has skyrocketed, Musk has become a symbol of growing inequality, something to which he seems to be sensitive. He was one of the billionaires mentioned in a Pro Publica investigation into how the ultra-rich avoid paying taxes and has become a target of members of Congress who are pushing a tax on billionaires.

“Whether or not the richest man in the world pays taxes should not depend on the results of a Twitter poll,” US Senator Ron Wyden, D-Oregon, wrote in a tweet on Saturday. “Time for Billionaires Income Tax.”

On his way to becoming the richest person in the world, Musk has made millionaires, and even at least one billionaire, among some of his fans, employees, and other investors. Among them is Leo KoGuan, a Singapore-based retail investor and business owner who used his already considerable wealth to amass more than $ 7 billion in Tesla stock.

Count KoGuan among Twitter followers who say it’s time for Musk to get some money out of the automaker, even if it’s just to be used by other Musk ventures exploring space and neural networks. “Politically and fiscally and since Elon is cash poor, he has no choice but to sell his holdings to pay taxes and be cash rich,” KoGuan posted on November 6.

© 2021 Bloomberg

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