On Saturday, Elon Musk, the world’s richest person, mulled on Twitter whether to sell 10% of his Tesla stock. The results of the Twitter poll he created: 57.9% of the 3.5 million respondents said he should sell the stake. So assuming he does sell— and he said on Twitter that he would “abide by the results of this poll”— how much does it come to?
Musk owns 170.49 million shares of Tesla, plus a bunch of very valuable options. Leaving the options aside, 10% of his stock is 17.049 million shares, worth $20.8 billion based on Friday’s closing price of $1,222.09 a share.
What would Musk pay in taxes on a $20.8 billion sale? Just about $5 billion, assuming he’s not offsetting it with losses on other investments. His capital gain is enormous. Musk paid about 49 cents a share for his initial investment in Tesla, according to the SEC filing for the company’s initial public offering; the shares have split 5 for 1 since then, so his cost basis from that investment is just under 10 cents a share.
The notion of selling shares follows a short-lived proposal by Sen. Ron Wyden to tax billionaires’ unrealized gains in response to the fact that some billionaires don’t pay federal income tax because they can borrow against their shares instead of selling them. Musk tweeted on Saturday “Note, I do not take a cash salary or bonus from anywhere. I only have stock, thus the only way for me to pay taxes personally is to sell stock.”
Since Tesla went public in 2010, Musk has only sold stock twice. In 2016, he sold 2.7 million shares for a total of $593 million in order to cover taxes for options he had exercised. In July 2010, when Tesla had its initial public offering, Musk sold a bit more than 1.4 million shares for a pre-tax total of $24 million. The stock has climbed nearly 1,400% since the start of 2020 and Musk has gotten nearly $294 billion richer in the process. Forbes calculates his net worth as of Friday evening November 5 at $318.4 billion. Musk is the first billionaire Forbes has tracked in our four decades of chronicling the richest Americans to cross the $300 billion mark.
Musk has made a big deal about being cash poor and selling all his homes. He lives in a tiny box house that he says he rents from SpaceX, the rocket company he runs. This Twitter poll may be a way for Musk to make it look acceptable to cash out of some of his stock, which he has suggested is trading too high. So one way to look at this: It’s not about taxes but about moving tens of billions of volatile Tesla stock into cash—at a time when the stock looks incredibly pricey.
It’s unlikely that Musk would sell 17 million shares of Tesla in one day. Such a flood of shares on the market could drive down the stock price. A more likely scenario would be smaller sales over an extended period of time—maybe months or a year, or possibly longer. If the past is any guide, we’ll likely know more soon by keeping an eye on Musk’s Twitter account. Musk has not responded to a request for comment from Forbes on his plan for the sale.
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November 08, 2021 at 03:52AM
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Here’s How Much Elon Musk Would Pay In Taxes If He Sells 10% Of His Tesla Stock - Forbes
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