Musk Sold Three Times More Shares Than Tax Payment Amount... What Is the Reason?

▲Elon Musk, CEO of Tesla [Image source=AP News]

[Asia Economy Reporter Kwon Jae-hee] Elon Musk, the founder of the U.S. electric vehicle company Tesla, who has recently been in the spotlight for consecutive stock sales, has sold $8.8 billion worth of shares (approximately 10.4 trillion KRW), which is three times the amount needed for tax payment, drawing attention to the background of this move.

According to the Associated Press on the 17th (local time), Musk sold about 8.2 million Tesla shares over the past nine days, totaling more than $8.8 billion.

The AP reported that various interpretations are emerging, suggesting that Musk might be converting some of his assets into cash or preparing in advance for taxes due next year.

According to data from the U.S. Securities and Exchange Commission (SEC), the amount needed to pay taxes on the stock options Musk exercised this week is about $3 billion (approximately 3.5 trillion KRW). At the current market price, selling 2.8 million shares would suffice, but Musk has sold shares worth more than $5 billion beyond that.

On the 6th, Musk said, "There have been many claims recently that unrealized gains are being used as a tax avoidance method," and proposed selling 10% of his Tesla shares, conducting a poll among his 60 million Twitter followers to gauge support.

Musk stated, "I do not receive any salary or bonuses anywhere, so my wealth is tied up in stock," and added, "The only way to pay taxes is to sell shares," revealing that the purpose of the sale was to pay taxes.

It is known that 58% of respondents in the Twitter poll supported the proposal, and since the 8th, Musk has been selling shares, having sold about 5% of his Tesla holdings as of this day.

However, questions have been raised about why he is selling a large amount of stock now for tax payments that are still a year away.

According to the compensation plan established in 2012, Musk holds 26.4 million stock options. The exercise period for these options expires next year, and taxes must be paid then. Musk can exercise the options at $6.24 per share, while Tesla’s current stock price is about $1,080.

Brad Badertscher, an accounting professor at the University of Notre Dame, said, "Federal taxes can amount to 40% of the sale proceeds," adding, "If he had waited a year and taken the 'immediate sale' approach, the tax on stock options would have been taxed as ordinary income, potentially halving the tax burden."

Daniel Ives, an analyst at Wedbush Securities, analyzed the Twitter poll, saying, "It is not a typical method, but Musk may have sent a signal to investors to prevent a massive sell-off."

He added, "If Musk had started selling shares without the Twitter poll, the stock price would have fallen about 15% more than it currently has."

Tesla’s stock price, as of the close on the 16th, has dropped about 14% compared to when Musk announced he would follow the poll results.

Eric Gordon, a law and business professor at the University of Michigan, questioned Musk’s reason for selling a large amount of stock now for taxes due next year, saying, "There is no explanation other than that he expects the stock price to fall."

He also added, "Musk has skillfully moved Tesla’s stock price through Twitter over time," and "He has shown that he is a master at influencing Tesla’s stock price, and this is a recurring story."

This content was produced with the assistance of AI translation services.