It’s not often that a multi-billionaire asks his followers on Twitter if he should sell 10 percent of his stock. But Elon Musk, the richest person in the world who now goes through life on Twitter as Lorde Edge, did.
Of the millions of Twitter users who completed the poll on his Twitter account, almost 58 percent said: ‘Sell it’.
But is that the whole story? No, and to explain that we have to go back to 2012.
Exchange options for shares
In that year, Musk got a whole bunch of options. He can exchange it for Tesla shares next August at a price of $ 6.24, writes CNBC.
And that’s a great deal for Musk, because on the stock market the price of a Tesla share is now about 1160 dollars. On paper, it gives him a profit of about 26 billion dollars (more than 22 billion euros). So do it, because the expression ‘otherwise you are a thief of your own wallet’ is the understatement of the millennium in this context.
There is one problem: the options that Musk has are employee options. If you exercise this (ie exchange it for shares with an additional payment) in the United States, you must pay income tax on the paper profit. That’s the difference between the stock price – in this case $1160 – and the strike price – $6.24 per share.
Musk gets paid in shares
It’s not about small beer. In total, this concerns 54.1 percent tax on a total of 26 billion dollars. In other words: Musk must pay more than $ 14 billion in income tax if he wants to be able to cash in his employee options.
But Musk doesn’t just have that money lying around. After all, he is paid in shares at Tesla and he does not receive a salary. At least, until recently he lived in California and you should get minimum wage there, but that won’t be enough.
So there’s only one thing to do, Musk concludes. He is selling some of the shares he already owns. And there are many: more than 170 million shares of Tesla, which together are worth almost 200 billion dollars. The 10 percent he wants to sell will therefore yield about 20 billion dollars: more than enough to be able to pay the tax authorities for his employee options.
So the poll on twitter to ask his followers was in fact show.
Bypassing the whole exercise by simply selling his options for a profit, Musk cannot. Because they are employee options, they cannot be sold via the stock exchange. Only he can exercise them.
In theory, Musk can choose not to convert his options into shares, but then he will miss out on a paper profit of almost $ 12 billion. Then the choice is not difficult.
For Musk, the options to exchange into stocks do not change much. He was already filthy rich. According to Forbes, his net worth is $318 billion.
Musk has no reason to complain
Tesla’s share price is falling by about 5 percent, due to the prospect that Musk will sell 10 percent of his shares. But that is offset by his paper profit of 12 billion dollars.
In any case, Musk has no reason to complain. Tesla’s stock price has risen by more than 25 percent since an order for 100,000 Teslas for car rental company Hertz was announced. And compared to a year ago, the share price is now 180 percent higher. And if, as until now, you own more than 20 percent of the shares of Tesla, then you benefit from that.