Why Is Elon Musk Selling Off His Tesla Shares — And Should Tesla Be Concerned? While the real intentions still stand vague, billions of dollars in Tesla shares have already been disposed off by its CEO.
- Elon Musk sells close to $9 billion worth Tesla stocks in a span of two weeks.
- The selling spree expected to continue for another couple of weeks.
- $84 billion wiped off from Tesla’s net worth after Musk’s selling spree causes a market frenzy.
- EV revolution and House reconciliation bill comes as a saving grace for the company.
The past few weeks have been a rollercoaster ride for Tesla stock and its investors, but not more than the company’s chief Elon Musk.
In the span of two weeks, CEO Musk has cashed as many as $9 billion worth Tesla stocks. And if Musk is to be taken by his words, he is still halfway towards meetings his pledge to sell of 10% of his holdings in the company.
According to the Securities and Exchange Commission filings, Elon Musk has so far sold Tesla shares worth $8.2 billion which has generated him $8.8 billion in proceedings. This leaves Musk still owning 164 million Tesla shares which translates to 17% stake in the company.
However, questions are making rounds on the internet as to what is Elon Musk’s real intention behind selling his shares in the EV company. How far will he go with the trend and most importantly, how is the move turning out for Tesla?
Let’s find out.
Why is Elon Musk selling Tesla shares? Here is a detailed explanation
Elon Musk is an unusual case of billionaires. Unlike other billionaires in the world, Tesla CEO does not own any home, chooses to not draw a salary and states that he is “financially illiquid”.
The last statement is rapidly transitioning with his recent selling spree and there has to be a strong reason for doing that.
There are different theories circulating around internet by experts and investors behind Musk offloading massive quantity of Tesla shares. Some of these hold all the grounds.
We begin chronologically with last year when the Tesla chief stated that he might have to sell of his holdings in the company as his exercising stock option expires this year. The move can be one way of the covering the same cost.
So how does this work?
Musk currently owns stock options worth $92 billion, one set of which expires in Aug 2022. These stock options allow Musk to buy more Tesla shares at a discounted rate. This set of stock options that is set to expire which is currently worth $23 billion and if Musk doesn’t purchase it before it expires, he gets nothing.
What does he get if he purchase this set? Tax liability. Worth how much? More than $10 billion.
This might be one explanation why Tesla CEO is on a selling spree — to cover this cost.
Another theory states that Musk finally might be listening to his financial advisors. Before selling off Tesla shares, Musk’s portfolio was a hundred percent virtual investment in his two companies- Tesla and SpaceX. This death recipe according to wealth managers all over the world might finally have started troubling Musk.
Billionaires tax proposed by Democrats might be another reason why Musk is motivated towards dumping Tesla shares off. Biden administration is planning to tax the ultra rich now for their unrealised gains too. For the same, Tesla chief is already under radar for paying virtually no income tax.
A few weeks back, Musk released a Twitter poll surrounding the same Billionaire Tax controversy asking people if he should sell 10% of his Tesla stake. Twitter responded in an overwhelming agreement.
To fulfill his pledge to sell of 10% Tesla shares, Elon Musk needs to sell total 9 million shares which would still a couple of weeks to fulfill.
How is the selling spree coming up for Tesla?
Tesla stocks might still be 1300% up since the beginning of 2020, the recent offloading has still caused a significant stir in the market- the one that cannot be ignored. So far, the selling has caused a 7% plummet for Tesla in the market, wiping off $84 billion from its valuation.
However, the company doesn’t have much to lose from the gimmicks of its CEO given that the EV revolution is right around the corner. The specimen of this revolution was witnessed on Friday after the House passed a significant tax-and-spending reconciliation bill that expands tax credit for EV purchases.