Twitter’s Playing Checkers, Elon’s Playing Chess

11/11 UPDATE: Immediately following a Twitter poll asking users if he should sell 10% of his Tesla stock holdings, Elon began offloading shares. According to SEC filings, Elon exercised a portion of his $6 calls on Monday, netting him $2.1 billion dollars worth of Tesla shares. He promptly sold half of those shares at an average price of $1180.

Over the following two days he sold an additional 3.6 million shares at an average price of $1082. These combined sales were worth about $5 billion dollars – Far away from the $15 billion he’ll need in order to pay his hefty tax bill. 

As a result, Tesla’s stock price has been extra volatile this week. If Elon’s sales are to blame, then investors better buckle up – those sales account for only 2.6% of Musk’s stockpile, meaning an additional 7.4% of his holdings must be sold in order to meet his promise of offloading 10%.

No Stranger to Twitter Trolling

Early Sunday Morning, Tesla CEO and world’s richest man Elon Musk polled his 62.8 million Twitter followers to ask if he should sell 10% of his Tesla stock. In it, he referenced the democrat-backed proposal to tax the wealthy through unrealized stock market gains. After more than 3.5 million users voted, the result was clear: Sell! Sell! Sell!

Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.

Do you support this?

— Elon Musk (@elonmusk) November 6, 2021

While this behavior falls in line with the rest of Elon’s Twitter antics, there may be more to his decision to “let the masses decide” than a sudden urge for democracy.

Namely, Elon was likely going to have to sell a large portion of stock in order to satisfy an upcoming tax burden.

This theory that Elon was always going to sell the shares is backed by something Elon said last September at Code conference. “I have a bunch of options expiring in early 2022” meaning “a huge block of options will sell in Q4 — because I have to.”

An Epic Tax Bill

So what are these options? Oh, just the normal $6 calls on a stock price that’s now trading above $1,200.

Realizing these gains means Elon would have to foot a colossal estimated tax bill of around $15 billion dollars, though that number fluctuates with the ebb and flow of Tesla’s rather volatile stock price.

If $15 billion sounds like an enormous amount of money, that’s because it is. To put $15 billion into perspective, that’s more than the combined net worth of Kim Kardashian West ($1.2 billion) and Twitter CEO Jack Dorsey (13.6 billion) according to Forbes.

The “Cash-Poor” Billionaire

Though Elon’s current net worth ($318 billion) makes this tax bill look like a drop in the bucket, it’s not an insignificant amount for someone who is … at least relatively … cash poor. Elon made it clear in a reply to Sunday’s poll that he does not take any salary from Tesla, receiving his compensation entirely from stock.

As such, most of his assets are locked up in the form of a 23% stake in Tesla. This includes 170.5 million shares, worth an estimated $210 billion. A 10% sale at the current price would amount to $21 billion dollars, more than enough to cover the $15 billion dollar tab.

In order to finance his lifestyle in the past, Elon has elected to take loans out against his stock holdings, rather than selling shares. Due to the sheer size of the bill, that approach wouldn’t make sense here.

Elon has yet to respond to the results of the poll, but he did say he would, “abide by the results of this poll, whichever way it goes.”

What do you think? Was this an elaborate mind game by the world’s richest man to offer the illusion of choice to his Twitter followers? Or do you think he was being sincere? Let us know on Twitter at @marketrebellion!

Learn how you can use the power of unusual options activity to conquer the market? Click here to download our Insider’s Guide to Trading UOA.