New York/Hong Kong (CNN Business)Elon Musk sold roughly $5 billion worth of Tesla shares this week — his first such sale since 2016 — just days after conducting a Twitter poll asking his fans if he should dispose of 10% of his stake in the electric carmaker.
According to filings with US securities regulators, Musk exercised options Monday and then sold nearly half of the 2.1 million shares he received, raising about $1.1 billion in cash to pay taxes relating to the transaction.
Musk then sold another 3.6 million shares of Tesla stock on Tuesday and Wednesday, according to additional filings. At an average price of about $1,082 per share, those sales were worth about $3.9 billion. The sales he completed Monday fetched a slightly higher average price of $1,180 a share.
The motivation for Monday's sale was "solely to satisfy [Musk's] tax withholding obligations related to the exercise of stock options," the filing said. The other filings did not disclose a particular reason for those sales.
The options Musk exercised were about 9% of those he needs to exercise before they expire in August 2022. But taking that 9% will result in a $1 billion federal tax bill, under the top federal income tax rate of 37%, with another 3.8% net investment tax on top of that.
While the need for Musk to sell shares to pay taxes had been known by investors, Tesla's stock fell following the Twitter poll on concerns that he intended to offload more than had been expected. The share price also could have fallen Monday and Tuesday in part because of Musk's sale of 4.5 million shares on those days.
If Musk truly intends to sell 10% of his take, as the Twitter poll suggested, there will be additional sales ahead, as so far he has sold just 2.6% of the shares he owned after exercising those options Monday.
Although filings detailing Musk's stock sales on Tuesday and Wednesday didn't mention any motivation, he does have an additional massive tax bill looming. When he exercises the additional options that are due to expire, he will have to report the value of the shares as regular income, at 40.3% federal tax rate, and likely some state tax.
The exact tax bill will be determined by the value of the shares at the time the options are exercised, but the federal tax bill is likely to be nearly $11 billion if shares stay near their current value.
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