Tesla head Elon Musk
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Dec. 9, 2021 was a day being watched closely by Tesla investors. They wanted good news that would send shares higher. Instead, they got more Elon Musk stock sales.
Social-media-fueled speculation had bulls hoping 12/9 would bring potential good news ranging from a stock split to a new product. Tesla (ticker: TSLA) didn’t give any indication something was up. It was a case of the internet doing internet things.
The only thing that happened was Musk sold more stock as part of a prearranged plan to exercise expiring management stock options. The SEC filings detailing the sales were released at roughly 8:20 p.m. eastern time.
Musk purchased another 2.2 million Tesla (ticker: TSLA) shares for $6.24 a piece. He sold another 934,091 shares to pay taxes on the gains. Gains derived from management stock options are taxed like ordinary income when management exercises them.
Musk has purchased about 13 million shares by exercising his stock options and sold about 5.6 million of those shares to pay the taxes. He has exercised about half of the options received from a 2012 grant. Those options were due to expire in mid-2022.
At the current pace of exercise, there is about three weeks left before Musk will be done with those options. It’s difficult to know exactly when Musk will be done. Details of Musk’s prearranged plan to exercise just aren’t known. Tesla hasn’t responded to multiple requests for comment about Musk’s stock sales.
Musk sold another 4.8 million shares that weren’t a part of options grants. He asked his Twitter (TWTR) followers back in early November if he should sell stock and pay taxes on unrealized capital gains. His followers voted yes and Musk, as a result, has sold more than 10 million shares worth more than $11 billion.
All the selling has created an overhang in Tesla shares. The stock is off about 17% since Musk’s Twitter poll. The S&P 500 and Dow Jones Industrial Average are down about 0.6% and 1.6%, respectively, over the same span. Tesla stock was down another 0.6% in late trading on Thursday.
Part of the problem has been the pace of sale. Musk has elected to exercise options and sell stock very slowly. He could have done it all at once using a broker to manage a secondary stock offering. Instead, he has sold stock in more than 600 separate transactions.
Tesla investors probably would have preferred the sales to happen faster. At this point, investors will just be happy when the selling is over.
Write to Al Root at [email protected]
