- Daily Zen
This Monday, Musk got rid of $1.1 billion worth of stock to pay income taxes on equity options that he also exercised that day, two of the filings showed.
Tesla Inc. Chief Executive Officer Elon Musk sold $5 billion worth of stock following his tweet about following through on a poll over paying the proposed billionaires’ tax. Musk, whose company reached $1 trillion in valuation, pushing him to the top of the heap of the world’s richest people, has disposed of more than 4.5 million shares this week, according to regulatory filings. Those were his first sales in more than five years.
This Monday, Musk got rid of $1.1 billion worth of stock to pay income taxes on equity options that he also exercised that day, two of the filings showed. The remaining sales were done on the next two days.
The response was a massive yes, with nearly 57 plus percent of people who participated in the poll urging him to do it.
The whole exercise was a result of a proposal floated by the present government that wants US billionaires to pay tax on their unrealized stock gains.
“Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock,” the Tesla chief executive tweeted on Saturday. He added that he would “abide by the results of this poll, whichever way it goes”.
He is not in favor and believes that any new tax would be extended to the middle classes one day. He tweeted: “Eventually, they run out of other people’s money and then they come for you.” And he left it to his 62.7 million followers to decide whether he should cough up the money or not.
Long-term capital gains face a federal tax rate of up to 20 percent. California, where Tesla was founded and has been based, charges up to 12.3 percent tax on capital gains.
The filings released Wednesday show some of the transactions were done in mid-September — weeks before the poll. Also, Musk’s compensation package is such that his millions of stock options in the company must be exercised before next August when they expire.
There are no indications if the poll determined the sales and whether he will continue to sell his stocks until he reaches the promised 10 percent divestment. For that, he will have to get rid of roughly 17 million shares and possibly more.
Three years ago, a very controversial compensation plan was drawn up for him, which allows him rights over large tranches of stock options when the carmaker meets specific performance targets, and the company’s shares hit pre-determined levels.
Taxes on such transactions are usually covered by immediately disposing of some of the newly acquired shares. Hence, it is possible that the sales of the shares and the option exercise would have happened regardless of the poll.
The poll results led to a 7 percent drop in share prices on Monday, wiping out $50 billion from Musk’s net worth.