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What Happens If Elon Musk Sells 10% Of His Tesla Stock?

Some think it will be catastrophic, others reckon it will be just a flesh wound...

Elon Musk isn’t known for letting opinions stick in his gullet. Instead, he seems to enjoy playing with stock prices and valuations (not to mention cryptocurrencies) like others enjoy peeling the label off a bottle of beer.

For many investors – many of whom were inspired by The Corona Effect (where boredom, disposable income, trading apps and lockdown led to many inexperienced investors getting in on the stock market with a bit more of an appetite for risk than the previous demographic) – Elon’s ability to spike (or tank) a stock or cryptocurrency has proved at best a lucrative enterprise and at worst a fun game.

But there’s a dark side: Musk’s Tweets could lose you a lot of money if you take them as gospel and put all your eggs in one basket (or if a company you have invested in happens to be on the wrong side of one of them). And if the Tesla founder’s comments on Bitcoin earlier this year weren’t warning enough, his latest spate of Tweets illustrates clearer than day why you should always have a diverse portfolio, and never make rash decisions based on groupthink or hype (as this writer learned the hard way).

To his credit, Musk has told people Tesla is overvalued before (though it is possible he is trying to build a reputation for honesty, while also subtly spruiking his company, as he also said he still thought it would be worth more in 5 years, despite being overvalued at the moment he made that comment). His latest Tweet, however, has some Tesla stockholders quaking in their boots.

His Tweet?

“Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.” He then asked followers: “Do you support this?” At the time of writing, 57.9% of respondants (out of 3,519,252 votes) had answered: “Yes.” 42.1% had answered: “No.”

In another Tweet, Musk added: “I will abide by the results of this poll, whichever way it goes.”

“Note, I do not take a cash salary or bonus from anywhere. I only have stock, thus the only way for me to pay taxes personally is to sell stock.”

Jordon Hodges – an American actor, screenwriter and producer known for his role as Noah Daly in the 2014 drama film Sand Castles – commented on Musk’s Tweet, writing: “He has something else planned here. Might take us a minute to see it. Elon is a ninja. He’s never 2D.”

Tesla investor and host of YouTube channel Dave Lee on Investing, Dave Lee, commented: “Hey Elon, lots of sites out there that offer paid Twitter poll votes for cheap (just google ‘buy Twitter poll votes’). This poll can be easily manipulated by those with strong financial incentives.”

Another Twitter user accused Musk of being a coward: “It’s cowardly to deflect this decision to your followers. Take some responsibility for yourself. You have the ability to help so many people by paying your fair share of taxes, no debate is needed and certainly no polls. Just be a responsible citizen and pay your taxes.”

“This Twitter Poll decides the fate of $20,000,000,000+ of Tesla stock lol,” verified Twitter user Mr Beast wrote.

Musk’s Tweet also highlighted the distrust many wealthy (and, for that matter, poor) Americans have of how the government spends public money, with various Twitter users (including wealthy capitalist Peter Schiff) suggesting Musk would be better off helping the world privately.

Schiff wrote: “From a diversification and valuation perspective the sale makes a lot of sense. The fact that you’ll have to pay taxes on the proceeds however is not a net benefit to society. The public would be better served by you wisely investing that money rather than government wasting it.”

Many other Twitter users bemoaned the Tweet, fearing a stock price crash on Monday. Twitter user Cory Wijnhamer wrote: “You do realize that Tesla stock will now tank on Monday because of this, thus ending the awesome run the stock has made the last month. Posts like this is taking money out of the pockets of the people who have believed in you and your company the most.”

Other users said that they thought Musk had no choice but to sell. One wrote: “If you did your research. He has to sell his stocks in order to pay taxes on his stock options that expiring in the money. His tax bill is going to be massive and needs to do this by the end of December. He literally has no choice.”

Many are currently waiting anxiously to see what becomes of Tesla’s share price in the coming days (and we presume they will be even more anxious if Musk actually goes ahead and sells his stock). Many social media users fear that if Musk sells 10% of his Tesla stock it could sink the stock price.

Not everyone believes Musk selling his stock will be catastrophic. According to Reuters, “Tesla bull Gary Black, portfolio manager at The Future Fund, said that Musk’s potential stock sale would lead to ‘1-2 days of modest selling pressure,’ but said there would be solid institutional demand to snap up the shares at a discount.”

Reuters also reported: “As of June 30, Musk’s shareholding in Tesla came to about 170.5 million shares and selling 10% would amount to close to $21 billion based on Friday’s closing, according to Reuters calculations.”

James Whelan, Investment Manager at VFS Group in Sydney, told DMARGE that – though it remains to be seen if Musk will follow through – it’s “never a good look” when an owner of a company dumps a large amount of stock (generally speaking).

However, Whelan also told DMARGE: “Elon Musk and Telsa are still intertwined so much that you would not be able to separate the two – he can’t survive and Tesla can’t survive without him either. He knows that the market knows that it’s not going anywhere; it’s still the same stock, it’s still the same company making the same things so there’s no difference from that – it survives.”

“If it dips and it will – it should – it’s a buyable opportunity because nothing has changed in the story – nothing has changed in the lithium story, nothing has changed in the EV story, nothing has changed in the Elon Musk story… and now we look at the reasons for it.”

“He’s not getting out because he doesn’t like the stock – obviously he’s not doing that – he’s getting out of it because he has apparently a significant bill to pay for his options expiry.”

“As usual he’s – this is why he should not be head of a major listed company – it’s not manipulation it’s just not the way someone should act if you want to instil trust and confidence in the market – of which they now make up a pretty significant portion.”

At the time of writing, Tesla stock price is down 7.82% today but is still up compared to five days ago.

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