Elon will have to make more sales ahead in order to sell 10% of his $TSLA stock

Summary

  • Elon Musk sold roughly $5 billion worth of Tesla shares this week — his first such sale since 2016.

 

  • After Elon’s Twitter poll, investors had concerns over his intentions to sell his shares that could have resulted in a decrease of the stock price. In order to sell 10% of his take there must be additional sales ahead since the current sales made less than 3%. 

 

  • Overall in the last 5 days the stock has lost 13.40% of its value.

What happened

 

Elon Musk sold roughly $5 billion worth of Tesla shares this week — his first such sale since 2016 — just days after conducting a Twitter poll asking his fans if he should dispose of 10% of his stake in the electric carmaker.

 

Musk exercised options on Monday and sold 2.1 million he received. He ended up raising about $1.1 billion in cash that will be used to pay his taxes. 

 

According to the U.S. securities regulators, he then sold a total of 3.6 million shares on Tuesday and Wednesday. From this transaction he raised about $3.9 billion. 

 

The motivation for Monday’s sale was “solely to satisfy [Musk’s] tax withholding obligations related to the exercise of stock options,” the filing said. The other filings did not disclose a particular reason for those sales.

 

What now

 

After Elon’s Twitter poll, investors had concerns over his intentions to sell his shares that could have resulted in a decrease of the stock price. In order to sell 10% of his take there must be additional sales ahead since the current sales made less than 3%. 

 

He won’t have quite as high a tax bite on the sales he made this week, since those are stocks he owned outright. Musk has owned about 80% of the shares in his portfolio since the time of the 2010 initial public offering, a stake that was based mainly on his investments in the company before it went public.

 

That means virtually all of the money he made from selling 3.6 million shares Tuesday and Wednesday will be considered a long-term capital gain, and be taxed at 20%. That will result in an additional federal tax bill of about $776 million, in addition to any taxes he owes on the exercise of his options. But he could have avoided that capital gains by continuing to hold those shares and selling only shares he acquires through the exercise of options between now and August.   

 

About the stock

 

On Friday before the exercise of any options the price of TSLA shares were above $1,200.

On Monday the stock’s price was slightly lower than Friday’s close somewhere around $1,180 and on Tuesday the stock suffered even more reaching $1,020 per share. 

 

Overall in the last 5 days the stock has lost 13.40% of its value.

 

Bottom Line

 

Most of Musk’s wealth is his Tesla shares and options to buy additional shares. Tesla (TSLA) became only the sixth company to ever be worth $1 trillion two weeks ago. But he is also the primary shareholder in privately held SpaceX.

Disclaimer – I/we have no position in any stock mentioned. I wrote this article myself, and it expresses my personal opinions. I am not receiving any compensation for it, other than FDGT Academy. I do not have or had in the past any business relationship with any company that is mentioned in the above article.

Natalia C. - Junior Analyst at FDGT Academy

Natalia C. - Junior Analyst at FDGT Academy

I am a stock analyst/investor with prior experience and knowledge to BSc Accounting and Finance. After completing my degree and exposure to the accounting firms I decided that the direction I should choose is towards the Investment world. I completed my masters in Investment Management where it gave me solid fundamentals to build my career on. I have examined a lot of different aspects of investment, from REITS, derivatives, currencies, bonds, equity and hedge funds. I never stopped learning about the market which is why I can analyze and write articles for FDGT community always personally opinionated. My passion are green energy and electric vehicles stocks as a whole. I also had my share of analyzing the work form home stocks that are coming to take over in the upcoming years.

Leave a Reply

Your email address will not be published. Required fields are marked *