Tesla and SpaceX CEO, Elon Musk, who is also the world’s richest billionaire with a net worth of $271 billion, sold approximately $5 billion worth of Tesla shares in the first three days of this week.
This move comes after The Boring Company CEO promised he would sell 10% of his 17% stake in his electric car company if Twitter users voted for him to make the sale. After recording approximately 3.5 million votes, the Yea’s had the day, accounting for 58% of the votes.
Elon’s 17% stake accounts for $208 billion as of Friday’s market close. 10% of his stock is valued at about $20.8 billion, indicating that there may be more stock sales from the world’s richest man in the coming days or weeks if he is to make good on his commitment.
What you should know
Elon Musk, according to an SEC report, had initially filed to sell some of his stocks long before his Twitter poll. The regulatory filings revealed that at least $1.1 billion of the sales were set in motion since September, through an arrangement called 10b5-1 plan.
The 10b5-1 plan is often used by executives to avoid suspicions of insider trading and is frequently used to spread sales over a period of time. Filings covering the remaining sales made on Tuesday and Wednesday did not specify whether they had been made under this same arrangement.
Musk said previously that he expected to sell a significant part of his Tesla stake to cover the taxes that will fall due on tens of billions of dollars worth of options that have to be exercised by next August.
The transactions disclosed on Monday revealed Musk had exercised some options, bringing him stocks worth about $2.3 billion at the close of trading. He paid only $13.4 million for the shares underlying the options, which had an exercise price of $6.24, compared with Tesla’s Monday closing price of $1,162.94. The shares fell the following day but recovered to close up 4.3% to $1,067.95 on Wednesday. Today it currently trades $1,072.68.
Musk’s willingness to cash in on 10% of his stock and incur a tax bill of more than $4 billion based on a Twitter poll, follows a proposal in the U.S that billionaires should pay tax on their unrealized capital gains. He warned last month that any new tax would one day be extended to the middle classes, stating, “Eventually, they run out of other people’s money and then they come for you.”
Musk had stated that he took no salary or bonuses from any of his companies, leaving him no earnings to pay income tax on. However, he has made billions of dollars through a compensation package agreed three years ago, under which he has been able to exercise large tranches of stock options when the carmaker meets certain performance targets and its shares hit pre-determined levels.
This is not the first time Musk is selling his shares. In 2016, the Tesla boss sold nearly 3.6 million shares, worth around $4 billion, while he also sold another 934,000 shares for $1.1 billion after exercising options to acquire nearly 2.2 million shares.
In total this week, Musk has sold about 4.5 million shares, separate from the 2.1 million that he gained from stock options.