Elon Musk, CEO of Tesla, stands in the foundry of the Tesla Gigafactory during a press event.
Patrick Pleul | Image Alliance | Getty Images
Tesla shares fell more than 5% in pre-trading on Monday after CEO Elon Musk asked his Twitter followers to sell 10% of his shares in the electric vehicle maker.
Tesla stock fell 5.5% to $ 1,155 at 5 a.m. ET Monday, a sharp drop from the price of $ 1,222.09 at which it closed on Friday.
The fall comes after Musk asked his 62.5 million Twitter followers to determine the future of some of his Tesla holdings.
In a Twitter poll launched on Saturday, Musk said, “There’s been a lot going on lately that unrealized gains are a means of tax avoidance, so I suggest selling 10% of my Tesla stock. Do you support that?”
The billionaire gave people the chance to vote “yes” or “no” and promised to stick with the poll results, however they went.
3,519,252 people answered and 57.9% of them voted “yes”.
Musk previously said he would likely sell “a huge block” of his stock in the fourth quarter.
In September, Musk said at the Code Conference in Beverly Hills, Calif., That his marginal tax rate would be over 50% by the time his stock options expire with Tesla and that he is planning a sale soon.
“I have a number of options that expire early next year, so … a huge block of options will be sold in the fourth quarter – because I have to, or they will expire,” he said.
Other current and former Tesla board members, including Robyn Denholm, Kimbal Musk, Ira Ehrenpreis, and Antonio Gracias, have also dumped hundreds of millions of dollars in Tesla shares since October 28, when the company’s shares were listed on the Nasdaq Stock Exchange shot up.
Shares rose after Tesla posted a record quarter and car rental company Hertz announced it was ordering 100,000 Tesla vehicles for its fleet. Musk waited a week after Hertz announced that Tesla had actually not yet signed a deal with the company. Before making this statement, he mocked investors who had Tesla shorts on Twitter and wrote, “Tesla Hertz Shorts”.
Since the Hertz announcement, Tesla shares have risen significantly, and so has Musk’s fortune.
Elon’s tax bill
Regardless of the results of the Twitter poll, Musk would likely have started selling millions of shares this quarter. That’s because he’s facing a looming tax bill of more than $ 15 billion.
His options expire in August 2022, but to exercise them he must pay income tax on profits.
Since the options are taxed as benefit or compensation to employees, they are taxed on the highest ordinary income, ie 37% plus a net investment tax of 3.8%. He will also have to pay the highest California tax rate of 13.3% as the options were granted and largely earned while he was taxable in California.
The combined state and federal tax rate is 54.1%. So the total tax burden on his options would be $ 15 billion at the current price.
Musk, who is also the CEO of SpaceX and the brain-computer interface start-up Neuralink, has not confirmed the size of the tax bill. However, he tweeted, “Note that I don’t get any cash or bonus anywhere. I only have stocks, so the only way I can pay taxes in person is by selling stocks.”
According to the Bloomberg Billionaire Index, Musk is currently the richest person in the world, ahead of Amazon founder Jeff Bezos and French retail tycoon Bernard Arnault. The index states that Musk’s net worth is $ 338 billion.
Of its sizable Tesla holdings, Musk has options on 22,862,050 shares at $ 6.24 that expire on August 13, 2022. He was granted these options in 2012.
–CNBC’s Robert Frank and Lora Kolodny contributed to this report.