Should Elon Musk sell 10% of his Tesla stock?

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Democrats in the US Senate have announced plans to fund President Biden’s spending program. The plan would tax billionaires on their stocks and other marketable assets. Taxes on these assets have long been tax-deferred, which has allowed the wealthiest people in the United States to avoid taxes indefinitely.

President Biden has proposed aggressive social development and climate change plans, both of which require significant funding. Biden’s climate change agenda has recently received a lot of attention thanks to the 2021 United Nations Climate Change Conference (also known as COP26) currently being held in Glasgow, Scotland. . At the conference, Biden reiterated that “climate change is already ravaging the world” and re-committed to tackling the devastation. Biden’s platform during his presidential campaign and beyond has been for the United States to become a 100% clean energy economy and achieve net zero emissions by 2050 at the latest.

But back to Musk …the richest man in the world asked the Twitterverse whether or not he should offload some of his Tesla shares (NASDAQ: TSLA) in order to aggregate his impending tax bill. Musk is committed to acting according to the will of the masses. With more than 3.5 million votes cast, 58% of those polled responded in favor of Musk’s sale of its shares, while 42% voted against. Analysts believe that regardless of the vote, Musk will likely choose to sell his shares because of the $ 15 billion tax bill he has to pay on his current stock options.

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Elon Musk currently does not receive any salary for his work as CEO of Tesla, but he has benefited greatly from the options he received and the gains in the company’s stock price. In 2012, for example, Musk received 22.8 million shares at a price of $ 6.24 per share. Shares of the company closed last week at just over $ 1,222 per share, bringing Musk’s earnings to around $ 28 billion. Musk’s options expire at the end of August 2022. However, in order to exercise these options, Musk will be required to pay income taxes at the upper levels of ordinary income tax. This would equate to 3% plus 3.8% net investment tax. Since most of the profit was made while Musk resided in California, he will also be required to pay 13.3% tax at the highest rate in the state of California. Its total tax bill would be 54.1%, or $ 15 billion at the current share price. Musk has since moved to Texas, a tax-free state.

As of June 30, 2021, Musk’s stake in Tesla was approximately 170.5 million shares. Selling those shares at the current price would bring Musk around $ 21 billion in profit. Analysts believe that if Musk keeps his promise to sell his shares (a move that would likely be made partly now and partly in early 2022), Tesla’s stock prices would drop slightly in the near term, but would likely rebound quickly as the buyers might be keen to buy the stock at a “discount”.

Another option Musk has for paying his impending tax bill is to borrow against the stocks to foot the bill. However, the billionaire said it was not his preferred option as the stock price could go down.

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