Shares of Tesla Inc. (TSLA) were down more than 5% during pre-market trading on November 8 after Twitter (TWTR) users voted in favor of Elon Musk selling about 10% of his stake in TSLA.
Musk Followers Vote “Yes” to Selling Shares
Elon Musk, the CEO of Tesla, has an estimated net worth of $318.4 billion. On November 6, Musk initiated a poll on Twitter asking his followers whether he should sell about 10% of his stock in Tesla to free up funds for tax payments.
Musk’s Tweet read, “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.” Noting that he did not take any cash salary or bonus from any company and only owned stock, he said selling his stake was the only way to pay taxes. “I will abide by the results of this poll, whichever way it goes,” he added.
The poll yielded a 57.9% positive response, with more than 3.5 million users voting in it. The poll was initiated in response to a proposal by Democratic lawmakers to tax the billionaire’s unrealized stock gains to finance President Joe Biden’s social spending bill.
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According to a Reuters report, as of June 30, Musk holds 170.5 million TSLA shares, and based on Friday’s closing price, the 10% stake is worth roughly $21 billion. The report also stated of Musk’s earlier comment that he would have to exercise several stock options in the next three months, creating a huge tax bill, and that selling his stake is the only way to fund tax payments.
Last month, Tesla crossed the $1 trillion mark in market capitalization, becoming the most valuable car maker in the world. The company’s shares have gained 190% over the past year.
Monday’s sell-off reflects investors’ panic regarding how and when Musk would react to the outcome of his poll. Some speculate that despite the outcome, Musk would have to offload his stake to pay the huge tax bill on the impending stock options.
Analysts’ View
Responding to Elon Musk’s poll, analyst Daniel Ives of Wedbush said, “With a tax bill that we calculate at north of $10 billion, selling stock over the coming months is not a surprise, although holding a Twitter poll to sell 10% of his stock is another bizarre soap opera that can only happen to one company and one CEO in the world, Musk.”
Ives has a Buy rating on the stock with a price target of $1,100, which implies 9.9% downside potential to current levels.
As per the analyst, Musk should sell his portion of the stock now rather than let it linger over the next year, since Musk’s stock options, worth $23 million, are deemed to expire in August 2022, and he was expected to sell some stock before year-end.
Overall, the stock has a Hold consensus rating based on 10 Buys, 6 Holds, and 6 Sells. The average Tesla price target of $863.75 implies downside potential of 29.3% to current levels.
Website Traffic
TipRanks’ Website Traffic tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Tesla’s performance.
Looking at the Tesla website traffic, in September, the website recorded a 15.67% monthly decline in visits, against the same quarter last year. However, year-to-date website traffic growth increased 3.5% compared to the same period last year.
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