Elon Musk Proposes Selling Tesla Stock
Jeremy Johnson's picture

Elon Musk Proposes Selling 10% of His Stock With Twitter Poll

Elon Musk has just Tweeted and done a poll on Twitter asking if he should sell 10% of his Tesla stock to show that he isn't trying to avoid paying taxes. Is this a good idea? What are the pros and cons? What will actually happen?
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Elon Musk Proposes Selling Stock

Elon Musk has just posted to Twitter and asked if he should sell 10% of his Tesla stock to show that he isn't avoiding paying taxes. Is this a good idea? Let's weigh the pros and cons.

Pros:

  • He deserves to cash in on his value and success for Tesla. He doesn't take a salary and stock is his only form of money. The stock is at a huge all-time high and I think it does make sense for him to sell some and realize gains.
  • We also don't know what tax laws will be like going forward and this may be the most favorable tax situation to sell in.
  • He can use the new cash to fund SpaceX, Boring Company, NeuraLink, and StarLink.
  • He shows that he's not trying to avoid paying taxes.

Cons:

  • He is using Twitter to determine his decision. This isn't a good idea - he should do a shareholder vote and go by that.
  • Twitter is full of spam accounts and bots which may not make the decision an accurate one.
  • He will have to pay a lot of taxes on his stock, probably the 20% long term capital gains. If he sells 30 billion of stock, he will pay 6 billion in taxes, and net 24 billion in cash.
  • He will likely create fear for Tesla stock, causing a mini correction - probably around 10 to 15 percent. This would be a good buying opportunity for others.

The one advantage of having a super CEO like Elon Musk for Tesla is that he has led them to a very commanding lead in the electric vehicle and energy business. On the other hand, it's also a weakness if he makes a decision that isn't the best for shareholders or other people.

What Will Happen?

I think that we are going to see a pivot on Elon Musk's statement and that he will take this to a shareholder vote, along with an eventual stock split. I just don't see Elon letting so many Twitter bots and shady accounts influence his decision to sell stock.

The only thing that may override this is that Elon Musk has some expiring stock options that he is going to have to sell and this statement may be because of that. He's going to need to pay tax for those stock options and he has to get the money from somewhere - either borrowing it or selling Tesla Stock to pay for it.

$18 billion in expiring stock options isn't quite 10% of his stock, but still represents more than 5% of his total stock. I think his 10% sell statement may be Elon having to sell 5% of his stock to pay tax for the expiring stock options. We'll have to wait and see how all this plays out.

If Elon Musk does sell some of his stock, he will receive a lot of criticism as Elon stated he is the first in Tesla and will be the last out.

I think he can still be the last out, he doesn't have to hold every single share to the end. It's ok to take some profits. And perhaps he's found a way to solve world hunger and that is the reason.

What do you think of Elon Musk Tweeting about selling stock? Is Twitter the right place to do a poll for his decision?

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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter, Facebook, LinkedIn and Instagram to stay in touch and follow his Tesla news coverage on Torque News.


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