We've just received news of Elon Musk's sale of his stock options and Tesla filing a Form 4 to show the sales of the shares. I believe there is more to come tomorrow and we'll see the big numbers from the sale of more of his stock options. It appears that the Form 4 filing on 11/8 was just for tax purposes for Elon exercising his stock options.
Follow us today...
We have news that Tesla has 2 Form 4 documents being filed and the Twitter community is abuzz with discussion about what it all means. Let's go over what it all means.
Tesla Files Two Form 4 Documents For Elon Musk Selling Stock Options
Elon Musk did a Twitter poll recently about selling 10 percent of his stock. What's interesting about this is that it looks like Elon Musk was already planning on doing this as of Sept. 14, 2021 and must have been able to see that the Twitter vote would be swayed to say "Yes" and therefore was already going to do it anyway. However, Elon could have pulled the plug on this before Monday if he wanted to, thus abiding by the Twitter poll, according to Gary Black.
There were two Form 4 documents seen today for Elon selling his stock options. A Form 4 must be filed with the SEC within two days of the sale of stock options. A Form 4 is a two-page document, which covers any buy-and-sell orders.
Stock options are different than regular shares of stock. Stock options are shares of stock that a company offers someone that they can buy at a price that stays the same no matter what. There is usually an expiration date for when you must buy these stock options or you will have to forfeit them.
In the case of Elon's stock options, his "strike price", the price at which he can buy them, was $6.24. He has to pay Tesla the amount equal to $6.24 multiplied by the number of options, 2,154,572, which is $13,444,529.28. That is money he simple gives to Tesla to own these shares. They become regular shares just like you can buy at your brokerage account, instead of stock options which expire.
There is also taxes required on the gain of these stock options. Elon sold these stock options to pay for the tax on that gain. There are many different transactions in both Form 4 filings, so I'll dumb things down to make it simple. Let's say the price at the time Elon exercised these stock options is $1,100. You multiple 2,154,572 by 1,100 and you get 2,370,029,200. That's almost $2.5 billion dollars. Elon must pay taxes on this, probably around 50% because his residence will be California for them.
Therefore, Elon sells some of his stock options to pay for the taxes and to pay Tesla for the stock. Elon sold in total, 934,091 shares of stock to satisfy his tax obligation and to pay Tesla for the stock.
This is the Smaller Sales of Stock
This is likely the smaller sale of stock. I think we'll see a much larger sale of stock tomorrow that equals about 10% of Elon's shares of stock - somewhere around 20 million shares as this is the amount of expiring options he has. We'll have to wait and see what the filing comes out to be tomorrow.
Either way, this is a large amount of money going to taxes and will probably mean that Elon no longer needs to take on debt to live if he decides to sell a little more in order to have some money. I believe we'll see a large portion of this money go to SpaceX and Elon's other ventures to help accelerate them, along with creating the Texas Institute of Technology and Science, if he gets some cash from his sale.
These sales of stock, which took place on 11/8/2021 and 11/9/2021 are the likely reason Tesla stock took such a big dip in price. It's because of the sale of so many shares and when more shares of stock are being sold than are being bought, the supply and demand equation demands that the price go down. It looks like Elon is increasing his stake in Tesla by exercising these options and that is bullish for Tesla.
Also, it's important to know that Elon will have had to do this no matter what by August of 2022, as that is when these options expire.
What do you think of Elon's sale of stock? If he does decide to sell some of these options for cash, what is he going to do with all this money? How much tax will he pay?
Leave your comments below, share the article with friends and tweet it out to your followers.
Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter, Facebook, LinkedIn and Instagram to stay in touch and follow his Tesla news coverage on Torque News.
Follow us today...