Elon Musk was the Tesla chief executive officer and sold his stock shortly after conducting a Twitter poll about whether to sell 10% of the huge stake.
The world’s richest person on Nov. 8 exercised 2.15 million options at a price of $6.24 per contract, according to a regulatory filing Wednesday. To collect $1.1 billion, he sold about 934,000 shares.
The shares were sold “solely to satisfy the reporting person’s tax withholding obligations related to the exercise of stock options,” the filing said. The filing also revealed that transactions were based upon a prearranged trading plan, which was adopted in September.
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These contracts were part of a 2012 stock option award Musk was granted. They would expire August next year so he’d have to exercise them prior. The exercise of these contracts may trigger income taxes. These are usually covered by disposing immediately of any newly acquired shares.
Tesla is one of the most popular companies, and executive share sales are often scrutinized by critics as well as fans. Musk may have avoided criticism by starting the poll, which he had earlier said would be likely to exercise these options soon.
Still, the headline-grabbing event pummeled Tesla stock on Monday and Tuesday, wiping out $50 billion from Musk’s net worth. Tesla’s Wednesday closing price was $1,067.95. This brought its losses down to under 13%. The stock gained more than 2 percent in trading after the disclosure.
It’s the billionaire’s first sale since 2016, when he last exercised stock options and liquidated some of his newly acquired shares to cover about $590 million of income taxes.
Following a Nov. 6 sale, the sale was held poll Musk set up on Twitter, saying that “much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.” Almost 58% of the 3.5 million votes were cast in favor of a sale.
Musk, 50, is the world’s richest person with an almost $300 billion fortune, according to the Bloomberg Billionaires Index. It is approximately 60% made up of Musk’s common shares. This suggests that Musk could make additional sales in order to keep his promise.
In order to prevent accusations of insider trade, executives often set up trading plans that are prearranged to help them sell their shares. Such plans can include a wide range of terms and conditions, which don’t have to be disclosed to investors. So there’s no telling whether Musk had arranged for these transactions to take place regardless of the poll’s outcome.
–With assistance from Andrew Heathcote.
