Tue. Dec 7th, 2021

Elon Musk asked Twitter users over the weekend to decide whether to sell more than $ 20 billion of his Tesla shares and pay taxes – and the online crowd answered with a resounding “yes”.

Musk’s apparent willingness to pay in a tenth of its shares and enter into a tax bill of more than $ 4 billion, based on the will of the Twitter sphere, follows a proposal in the US that billionaires pay taxes on their unrealized capital gains. He warned last month that any new tax would one day be extended to the middle classes, tweeting: “Eventually they run out of other people’s money and then they come for you,” he tweeted.

Leaving it to the crowd to decide if he should do his first large-scale sale of Tesla shares was the kind of trick that delighted Musk’s fans and made him the business leader most followed on Twitter, with 62.7 million followers, while his many critics.

“Whether the world’s richest man pays taxes at all or not should not depend on the results of a Twitter poll,” said Ron Wyden, the Democratic chairman of the Senate Finance Committee, before the outcome of the mood was known. Wyden has proposed a new tax on billionaires’ unrealized capital gains that will hit the 700 richest people in America.

Musk said he does not take any salary or bonuses from any of his companies, leaving him no earnings to pay income tax. However, he made billions of dollars through a controversial Tesla compensation package agreed three years ago, under which he could exercise large portions of stock options when the automaker reaches certain performance targets and its shares reach predetermined levels.

“Lately, a lot of unrealized gains are being made which is a way of tax avoidance, so I propose to sell 10% of my Tesla shares,” the Tesla CEO tweeted on Saturday. He added that he “will stick to the results of this poll, no matter what.”

The 24-hour poll ended with nearly 58 percent of the 3.5 million responses asking him to sell. Musk did not immediately respond to a request for comment.

If he continues, the vote will drop a large block of Tesla shares on the market. Based on Friday’s closing price, Musk’s 17 percent stake in Tesla was worth $ 208 billion. He did not indicate when or how he was going to get rid of the stock. Many CEOs use so-called “blind” sales programs when they get rid of large interests, to spread the sales over a longer period of time and to avoid any claims that they are using inside information to time their sales.

Musk’s promised sale will be significantly more than the $ 12.3 billion worth of shares that Tesla itself sold in 2020, when it took advantage of a rising share price to replenish its balance sheet. The sale was divided into three installments during the year, with the largest two amounting to $ 5 billion each.

The average daily trading volume in the stock reached $ 25 billion, making it one of the most liquid stocks on Wall Street.

Long-term capital gains face a federal tax rate of up to 20 percent, though Musk may have saved himself billions of dollars in extra state taxes. California, where Tesla was founded and based for most of its life, levies up to 12.3 percent tax on capital gains. Musk sold three homes he owned in California last year and said last month that Tesla was officially moving its headquarters to Texas, which does not levy any personal income or capital gains tax.

To say in public that he would sell such a large block of shares and then not go through, Musk could expose himself to actions by regulators, if seen as something that could affect the Tesla share price. Three years ago, the Securities and Exchange Commission required the company to start reviewing any of Musk’s communications that could affect its share price, after inaccurately tweeting that Tesla was close to a buyout.

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