Elon Musk surprised his followers on Twitter during the weekend with a "survey", which practically immediately changed the will of investors and drove Tesla into one of the biggest price drops in history, as the stock lost 12 percent in just one day. Why Musk does these kinds of things is revealed in this write-up.
The richest people in the world have inestimable wealth. But it is necessary to realize that there is a significant difference between wealth and income. And that's exactly why Elon Musk took to Twitter over the weekend to ask his followers if he should sell 10 % of his Tesla shares. In doing so, it causes small tsunamis in the financial markets. And that, for all of us who are interested in what affects the value of stocks, is fascinating and very exciting.
For the uneducated and ignorant
Elon Musk, like many extremely rich business leaders, does not receive a salary like ordinary mortals, because the value of his assets exceeds 300 billion dollars, and he simply does not need this. We have no problem imagining him diving into a vault with gold coins, like the cartoon character Uncle Scrooge (Scrooge McDuck). The 300 billion figure mainly refers to Musk's ownership stake in Tesla, which is worth a trillion dollars.
Like any mortal, Elon Musk has to eat, buy croissants and pay bills.
So where does he get the money?!
This gives him credit – mostly. Musk and other ultra-rich people borrow heavily from banks, using their stocks or other assets as collateral for the loans. In August, Tesla disclosed that approximately 88 million of Musk's Tesla shares had been pledged as collateral "to secure certain personal indebtedness." At the time, those shares were worth $63 billion.
Much has been 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
A tax loophole known to billionaires
The key is that these bank loans are not taxed like regular income would be - i.e. a salary. If you're Elon Musk, you can easily go to the bank and say, "I need $10 million because I want to fill a vault with coins and swim in it," or "I want to buy a helicopter, three yachts, and a house in the Caribbean."
The bank will offer the money with a smile and give you a really good offer, like 3% interest. But if Musk got that $10 million by selling Tesla stock, he would likely be subject to capital gains tax at a rate of about 20 percent. Also, as CEO, he can't sell shares whenever he wants - because that would usually be a sign of trouble, which can cause investors to panic. Just Musk's suggestion of a stock sale, which he must do because of his option package, sent Tesla's stock down nearly 5 % on Monday.
This kind of behavior is why Musk and Amazon founder Jeff Bezos, two of the richest people on the planet, pay virtually no taxes. This is what a ProPublica survey showed.
Embarrassing for Dacars
Well, Musk doesn't see it that way, which is why he's been attacking the Democrats' proposal for a billionaire tax that would help fill the gap in paying for President Joe Biden's mega-rich social spending plan.
The famous tweet about the 10 percent
The Twitter charade over the weekend left financial analysts scratching their heads and sleeping worse than if Musk hadn't tweeted this weekend. "Having a Twitter poll to sell 10 % of his shares is another bizarre thing that can only happen to one company and one CEO in the world," Daniel Ives, senior equity research analyst at Wedbush Securities, wrote in a note to clients.
In a cryptic message Saturday (11/6/2021), Musk suggested or even announced the sale of 10 % of his Tesla stake — currently valued at around $20 billion — as if it hadn't occurred to him the moment the Democrats' billionaire tax became part of the "national" conversation and a topic as hot as chestnuts.
Indeed, Musk has known for much of the past decade that he would have to sell those shares before August 2022. Namely, as part of his complex compensation package, Musk has more than 20 million stock options that expire next year. So he simply has to sell the shares. And he doesn't care when and under what tax conditions. Better sooner than later.
So why is Musk tweeting? Because he enjoys the chaos he creates. His Twitter thinking regularly inflates or deflates any thing in the world...or inflates a "certain" cryptocurrency by a factor of two. And although the "Securities and Exchange Commission" has already given him technical instructions to have his tweets reviewed by the highest instance of Tesla's legal department, it is not clear whether this is actually happening. Musk still regularly tweets comments about changes in the market, and last year, according to the Wall Street Journal, regulators told Tesla that his use of Twitter violated agreements twice. However, it is still not entirely clear how they will act against him.
In financial circles, calls are getting louder and louder for Elon Musk's behavior to be sanctioned, as the financial markets are extremely susceptible to his "signals".
The stock reached a peak
According to many analysts, Tesla stock has peaked and this type of price correction is quite normal. Even without Musk's tweets, the growth was more than 50 percent in just a few months. So that many warn that a period is coming when profits will no longer be possible.
summarized by cnn.com
