Are the ultra rich preparing for a massive market crash by selling shares on “top”? Or are they just paying their long hefty tax bills?
- Elon Musk sells off 10.1 million Tesla shares amounting $10.9 billion.
- Jeff Bezos, Satya Nadella, Mark Zuckerberg and the Waltons among other billionaires on a selling spree before end of 2021.
- 2021 recorded the highest offloading of share holdings in the last 10 years.
- The trend to continue in December given the suitability of month for tax planning.
Billionaires are on the biggest selling spree of the decade. The likes of Elon Musk, Jeff Bezos, Satya Nadella and more are discharging their share holding in such huge portions that market is brimming with questions.
The year 2021 is not yet over and CEOs and corporate insiders have already sold a whopping $69 billion in stocks. According to InsiderScore, the figure is a 30% rise since 2020 and a staggering 79% more than the 10 years average. This number excludes selling by the large institutional investors.
According to the experts, the figure is only expected to go up in December as the month is an active time for tax planning.
Ben Silverman, director of research at InsiderScore/Verity said:
The increase in the dollar value of insider sales in 2021 can be attributed to multiple factors, with historically high stock valuations being the primary driver. The presence of ‘super sellers’ during the period has help pump up sales total.
Massive Selling Spree of Billionaires- The Richests in the World Sold the Most
Tesla CEO Elon Musk sold off 10.1 million shares of the company that are valued for $10.9 billion since the first week of November. The CEO of Microsoft, Satya Nadella, on the other hand, sold off half of his share holding in Apple- 840,000 shares, cashing out $285 million.
Jeff Bezos was another billionaire on the list who raised $9.97 billion by selling the stocks of his company Amazon in 2021. The other notable names on the list are the Waltons and Mark Zuckerberg. The Waltons sold $6.18 billion worth of Walmart shares this year while Zuckerberg disposed off $4.47 billion worth Meta stocks in 2021.
According to the report by InsiderScore, the biggest four sellers in 2021 make up for 37% of the total sale this year. These four sellers are Elon Musk, Jeff Bezos, Mark Zuckerberg and the Waltons.
Why Are Billionaires Selling Their Shares?
There are multiple answers to the question that almost every retail investor seem to have in mind. A part of the credit goes to the highly unstable conditions due to the pandemic that just doesn’t seem to end. Another explanation can be the massive tax bills given the year is coming to an end. U.S. economy, on the other hand, also has a role to play in the situation.
Amazon Founder Jeff Bezos sold $3.4 billion worth of shares right before the Black Thursday market crash. So are the billionaires selling off their stocks in anticipation of a highly-possible market crash? Let’s try to understand.
Stock Market Bubble and Economic Meltdown
During the beginning of 2021, an overwhelming number of economists and experts expressed their fear that we are in a stock market bubble. An investor poll conducted by E-Trade in April certified the belief with 69% investors firmly believing in stock market bubble.
The short term rise in the value of stock prices is not really the result of market recovery but massive cash injection by Fed earlier during the year. In reality, the global economy is still far from stable recovery given the recurring outbreak of virus.
Global supply chain crisis has put international trade under a massive threat along with unemployment situations. Adding to the list of hurdles for global economy is the lowest productivity level in 40 years along with debt levels at an all time high.
A soaring stock market despite all the underlying issues is the certificate of a stock market bubble.
What makes the problem worse is the QE (quantitative ease) policies that have enabled the flow of cheap money for companies to borrow given the near-zero interest rates. The most immediate consequences of all these measures is inflation of the value of US dollar.
Therefore, there are high chances that billionaires are selling off their stock holdings that are currently on “top” to avoid the market crash that is highly possible in the near future.
Or billionaires might just want to pay off tax bills!
Biden administration has decided to take a toll on the wealth of ultra rich living in America. The billionaire tax bill might have suffered a defeat in the Congress, the federal tax for high earners are still going to hike notably. A new 8% surtax on earnings above $25 million and 5% on above $10 million is proposed by the House.
This spells a big reason for CEOs and CXOs to cash in on their share holding that provides a bit relief in tax payments.