The stock of Tesla Inc. was sold for $5 billion by its CEO Elon Musk, who did so immediately after polling his followers on Twitter to determine if he should sell 10 percent of his enormous share in the electric vehicle manufacturer.
According to regulatory papers made public on Wednesday, the world’s wealthiest individual has sold more than 4.5 million shares in the last week. Those were his first sales in more than five years, and he was overjoyed.
When Musk conducted a survey on whether he should sell a portion of his Tesla stake over the weekend, he ignited a firestorm that he tied back to a debate about whether the ultra-wealthy are paying their fair share of taxes. Musk, who frequently posts on Twitter and frequently engages on controversial topics, has become a lightning rod for controversy. In response to the poll, which resulted in an overwhelming decision to sell, shares of General Motors fell by 16 percent in two days, as investors fretted about the long-term implications of dumping such a large block of stock.
According to two of the filings, Musk sold around $1.1 billion worth of shares on Monday in order to pay income taxes on equity options that he had also exercised on the same day. Those trades were carried out in accordance with a pre-arranged trading strategy that was approved in mid-September.
On Tuesday and Wednesday, he completed the remaining sales transactions. There was no indication in the files describing the disposals that they had been planned ahead of time.
In the documents, there really is no evidence of whether Musk’s weekend Twitter poll had any impact on his decision to carry out any or all of the transactions—or if he intends to continue selling until the 10 percent criterion has been achieved. His overall holdings would have to be reduced by around 17 million shares, or even more if he adds the value of his exercisable options in his total holdings.
The options Musk exercised were derived from a significant award he got in 2012, according to Musk. He would have had to use them by the end of the month of August, otherwise they would have expired. Taxes on such transactions are often offset by the sale of a portion of the newly acquired stock soon after the transaction. Musk said publicly earlier this year that he expected to execute the options he received as a result of the 2012 award in the near future.
Given that the option exercises and accompanying sales were carried out in accordance with a pre-arranged plan, it’s probable that they would have been carried out regardless of the conclusion of the Twitter vote. However, the specifics of such plans are not required to be disclosed to the public, and executives have complete discretion to cancel or change them at any moment.
Nonetheless, the attention-getting Twitter referendum saw Tesla’s stock tumbling on Monday and Tuesday, wiping away $50 billion from Musk’s net worth in the process. EV maker Tesla increased its share price by 4.3 percent on Wednesday to end at $1,067.95, limiting its losses this week to less than 13 percent.
Following the disclosure of the first few deals, the stock climbed by 2.7 percent in after-hours trading following the announcement. However, many of the submissions came in after that period had finished, and Tesla tokens on the FTX cryptocurrency platform were trading at roughly $1,049 as of 2:06 p.m. on Thursday in Hong Kong.
After exercising stock options and liquidating part of the newly acquired stock to satisfy around $590 million in income taxes in 2016, the billionaire made his most recent sale of stock in 2017.
Musk stated in his poll announcement on Nov. 6 that “a lot has been made recently about unrealized gains being a technique of tax evasion, therefore I suggest selling 10 percent of my Tesla shares as a tax-saving measure.” A total of about 58 percent of the 3.5 million votes cast were in support of selling the company.
According to the Bloomberg Billionaires Index, Musk, 50, is the world’s wealthiest individual, with an estimated worth of about $300 billion dollars.