Regulatory filings released on November 12th show that Elon Musk, CEO of Tesla, sold nearly $7 billion of his company’s shares in a stunning twist of events. The 50-year-old billionaire who helped fuel the Dogecoin spike earlier this year let go of 4.1 million shares held in a trust and another 1 million held elsewhere.
The sales hit Tesla’s stock price hard, seeing a 15.4 percent drop over the course of the following week, an even worse dip than his cars’ “autopilot” accidents that led victims to hire a personal injury lawyer in San Francisco and elsewhere. Nonetheless, the company reached a $1 trillion market value in November, making it the latest tech giant to achieve that feat. So, what was behind this sudden market sell?
Social Media Responds
The sale came one day after Musk created a poll on social media site Twitter, asking if he should sell a mere 10 percent of his stake in the electric car manufacturing company. Millions of users took part in the poll, able to answer in favor or against the billionaire’s decision.
The tweet read, “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do You support this?” As it turns out, nearly 58% out of 3.5 million voters were in favor.
Tesla’s stock began declining after the tweet was made, which means Musk sold at a significantly lower share price than he would have prior. Filings showed that some of those 5.1 million shares were sold prior, allowing Musk to partially cash in on the previously higher stock price.
The sale from Musk’s stocks is liable for a capital gains tax of $1.4 billion, something the entrepreneur feels is paying his fair share of taxes after US Congressional Democrats proposed a tax on the super-wealthy. The proposal would tax held stocks as opposed to just sales of stock.
Musk still holds roughly 167 million shares of Tesla, however, and is facing a $15 billion tax bill on stock options with the proposal. Critics have pointed out that he would have likely sold millions in shares regardless in an attempt to avoid paying higher tax bills if the proposal passes.
Billionaires and Taxes
Between 2015 and 2017, Musk paid only $70,000 in federal income taxes, with a sum of zero paid in 2016 despite having a net worth of $152 billion. That number is lower than the national average household at 3.27 percent.
Musk defended himself by saying he takes no salary or benefits from his position, living only off of stock options. This would require Musk to take out loans against his company’s shares to both fund his projects at Tesla as well as his lifestyle. He doesn’t have to pay taxes on those loans and can even deduct the interest on his tax filings.
Upon figuring this nugget of information out, Musk has received extensive backlash from the public and lawmakers. The billionaire claims to have sold his houses and other property to fund future projects, like the company’s move to Texas, but many are still skeptical with his massive holdings of company shares.