Elon Musk, the CEO of Tesla, is expected to face a tax bill of more than $15 billion on stock options in the coming months, making a sale of his Tesla stock this year likely regardless of the Twitter vote.
Over the weekend, Musk asked his 62.7 million Twitter followers if he should sell 10% of his Tesla stock. He wrote, “Much has been made recently about unrealized gains being a way of tax avoidance, thus I propose selling 10% of my Tesla stock.”
The Tesla CEO said he would “abide by the results of this poll, whichever way it goes.” The results were 58% in favor of selling and 42% against, suggesting he will sell the shares.
Musk would have likely began selling millions of shares this quarter regardless of the poll’s outcome. The cause is a $15 billion tax bill that is impending.
Musk received options as part of a compensation package in 2012. Because he does not receive a salary or cash bonus, his wealth is derived from stock awards and increases in the value of Tesla’s stock. The award in 2012 was for 22.8 million shares at a strike price of $6.24. On Friday, Tesla shares finished at $1,222.09, bringing his total gain on the stock to just under $28 billion.
Musk hasn’t said how much the tax bill will cost. He did, however, tweet: “Please note that I do not receive a monetary income or incentive from anyone. Because I only own stock, the only method for me to pay taxes is to sell shares.”
Because CEOs have a limited window in which to sell stock, and Musk would most likely want to spread his sales out across at least two quarters, analysts and tax experts have predicted Musk will begin selling in the fourth quarter of 2021.
“I have a boatload of options that are expiring early next year, so… a significant block of options will sell in Q4 — because I have to or they’ll expire,” Musk stated at the Code conference in September.
Musk could, of course, borrow additional money against his Tesla stock, which is now valued at over $200 billion. Despite this, he has already committed 92 million shares to lenders in order to obtain cash. “Stocks don’t always go up, they also go down,” he noted at the Code conference when asked about borrowing against such volatile assets.
Musk is still amassing options not included in Tesla’s 2012 compensation plan. Tesla’s board of directors awarded him an extraordinary “CEO Performance Award” in March 2018, consisting of 101.3 million stock options in 12 milestone-based tranches (adjusted for the 5-for-1 stock split in 2020).