Elon Musk’s tweets once again are shaking shares of Tesla. This time the CEO asked his Twitter users if he should sell 10% of his Tesla stock – worth up to $25 billion…in order to pay capital gains–and Twitter said “yes.”
Tesla’s stock fell 2.6% in morning trading amid the news as investors worried about that much stock hitting the market.
Musk’s Big Twitter Question
Over the weekend, the CEO of Tesla and SpaceX asked his followers whether he should sell his stocks to pay his capital gains taxes.
“I do not take a cash salary or bonus from anywhere,” he exaplained. As such, he explained, capital gains are the only way he could pay taxes personally.
“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?” he asked.
Some 3.5 million people voted. Nearly 60% of respondents said ‘yes.’
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?
— Lorde Edge (@elonmusk) November 6, 2021
If Musk were to sell his shares, he would collect a considerable amount of money and would therefore face some $5 billion in capital gains taxes. If he doesn’t sell the stock, then he hasn’t had a gain, and therefore would have no tax bill. Under current law, that is…
Unrealized Gains
Apparently, what motivated Musk to raise this issue were claims that billionaires were not paying enough in taxes.
The tweets were likely prompted by a legislative initiative to tax unrealized capital gains.
In October, Treasury Secretary Janet Yellen defended a proposal to tax the appreciation of investors’ assets, whether they sold their assets or not.
Currently, capital gains taxes apply to profits made on the sale of assets. The proposal would levy a tax on the appreciation of assets once yearly, whether sold or not.
Tesla Tanks
Predictably, shares of Tesla dropped after the poll closed.
Interestingly, crypto traders were the quickest to react. Tesla tokens on the FTX platform dropped by more than 6%.
Tesla tokens are blockchain contracts that replicate the stock’s price. Amazon, Apple, and other well-known companies and exchange-traded funds (ETFs) all have their own tokens.
Traders can use these tokens to bet on the stock’s success without having to buy the shares.
Stock investors reacted as well. The shares of Tesla subsequently fell by some 5% in futures trading. By 10:30am ET they recovered somewhat to $1193 a share.
Musk Fights Back Against Attacks On Wealth
As founder of the company, Elon Musk owns a substantial holding in Tesla. Accordingly, the recent surge in the stock price has made him the richest man in history.
However, this newly acquired status has opened him to much criticism over his wealth, much of which is on paper since he’d need to sell his shares to collect the cash.
From a diversification and valuation perspective the sale makes a lot of sense. The fact that you'll have to pay taxes on the proceeds however is not a net benefit to society. The public would be better served by you wisely investing that money rather than government wasting it.
— Peter Schiff (@PeterSchiff) November 7, 2021
Other users pointed out that Tesla benefits from government spending. Ohio Rep. Casey Weinstein pointed out that Tesla recieved a $465M loan from the Federal government.
Tesla paid back the loan in 2013.
One Twitter user said he had voted for the sale, despite knowing it would hurt him financially. Presumably, this is due to the user holding shares of Tesla.
Voted Yes despite knowing this will hurt me.
1) $tsla is overextended, sell high to pay your tax
2) This is the best time to reduce debtMoney aside, your well-being is number 1 priority to most of us. ❤️
— Chicken Genius (@pakpakchicken) November 6, 2021
— Jed Thomas (@t_jedrick) November 7, 2021
