Elon Musk’s weekend Twitter poll took shareholders by surprise as he asked people on the popular app to vote if he should sell 10% of its Tesla shares to pay taxes. Moreover, he vowed to abide by the result.
Tesla shareholders did not have a relaxing weekend. On Sunday, Elon Musk, the company’s CEO, started a Twitter poll asking people if he should sell 10% of his stocks to pay taxes on unrealized gains.
Moreover, he said that he would abide by the poll results, and the results suggest he should sell. Consequently, shares of Tesla are down -6.5% in premarket trading, last seen at $1,142.
Truth be said, Tesla rallied during the pandemic. It recently popped above $1,000 in a move that triggered many stops. The short interest in the company (i.e., investors holding short positions, betting that the company’s share price will decline) is meager, at 3.72%.
Tesla’s profitability has improved consistently since joining the S&P 500 index as the electric vehicle industry stands to benefit from the green wave bringing new regulations to stop climate change.
But the big question after the poll is if it turns out to be a seismic event for the stock market. As part of the S&P 500 index, an uncontrolled decline may easily trigger a risk-off environment.
What made Musk want to sell his shares?
Elon said that to end speculations that unrealized gains are a means of tax avoidance, he proposes to sell 10% of his Tesla holding since he does not have a salary and does not take a bonus from the company. In other words, the only way for him to pay taxes is to sell stock.
3.5 million people voted on his Twitter poll, and 58% supported selling. Thus, Musk is on the hook to follow what he preached.
We don’t know if he would actually do it, but a couple of questions arise. One is if his brother, Kimbal, knew about the poll, as he sold Tesla shares worth over $100 million one day before the poll’s announcement. Another is, why is Elon reacting to a proposed tax which is not even a tax law yet?
Sure enough, Tesla shareholders are used to the stock price’s volatility. After all, the stock price gained +43% in October 2021 alone. Could this be the start of a bearish market for Tesla?