Musk asks Twitter if he should sell 10% of his Tesla stock; 58 percent say he should

Elon Musk proposed selling 10 percent of his Tesla Inc. stock on Twitter Saturday, and took a poll of people on the social network to see if they supported it.

Musk said he would “abide by the results of this poll, whichever way it goes.”

As of Sunday afternoon, 57.9 percent of the 3.5 million participants said he should sell. The poll ended at 3 p.m. EST.

"I was prepared to accept either outcome," Musk said, after the voting ended.

The amount of stock in play is valued at about $21 billion, based on his holdings of 170.5 million Tesla shares. The stock, which surged 74 percent this year to a record on Thursday, closed 0.6 percent lower at $1,222.09 on Friday.

Including stock options, Musk owns a 23 percent stake in Tesla, the world's most valuable car company whose market value recently exceeded $1 trillion. He also owns other valuable companies including Space X.

The number of shares Musk could be set to offload based on the Twitter poll is equivalent to 80 percent of the average daily trading volume for Tesla in the past three months.

Musk, the world’s richest person known for his tongue-in-cheek tweets, cited recent discussion of the wealthy hoarding unrealized gains to avoid paying taxes.

The amount of Tesla stock Musk may potentially sell would be even greater if his options are included.

At the Code Conference in September, Musk said he pays an effective tax rate of 53 percent on stock options he exercises. He added that he expects that tax rate to rise next year, with “a huge amount will be paid in the next three months because of expiring options.”

“We are witnessing the Twitter masses deciding the outcome of a $25B coin flip,” venture capitalist Chamath Palihapitiya said in response to Musk’s tweet.

“Whenever the dust settles, people always step back in, given the number of times in the grand scheme of things this company has had fairly large pullbacks," said David Madden, markets analyst at Equiti Capital. "While selling stakes will have an immediate impact, the important bit here is the reason for selling stakes which is tax purposes and the market is not too rattled with this reason since there is absolutely no reason to believe that the company is not doing well.”

"You could say he just wants to sell some stock now because the valuation has rocketed lately, cash out while the going is good," said Neil Wilson, chief market analyst at Markets.com. "It's hard to criticise someone for doing that. And rather than get berated by his fans for selling down his holdings, he can say 'look, you told me to do it!'. Either way, Musk was due to start selling soon anyway as he faces a monster tax bill on some of his stock options. And since he takes no salary or bonus from being Tesla CEO (he likes to remind us), the only way to cover would be to sell some shares. Seems fair enough, but does it need all the Twitter show business?"

Saturday’s tweet marks the second time within a week that Musk has discussed selling Tesla shares.

On Sunday, he challenged a United Nations official who said just a small percentage of the billionaire’s wealth could help solve world hunger. He wrote that he would sell Tesla stock if the World Food Programme could describe the accounting on his Twitter thread.

“Looking forward to the day when the richest person in the world paying some tax does not depend on a Twitter poll,” University of California at Berkeley economist Gabriel Zucman said in a tweet

Probably legal

Musk is unlikely to incur the wrath of regulators with the U.S. Securities and Exchange Commission, in contrast to his infamous “funding secured” tweet in August 2018 about taking the company private.

Musk has been telegraphing a potential stock sale because of taxes for months. Even though Tesla shares as dropped in Monday trading, Musk’s tweets about his personal holdings probably aren’t a violation, a securities-law expert said.

“He’s acting in his capacity as a shareholder. He could use a Ouija board to decide when to buy and sell shares,” said Jonathan Macey, a professor at Yale Law School. “It’s kind of sad that every time this guy sends out a tweet, people wonder if he’s in trouble with the SEC.”

The terms of a settlement agreement with the SEC require that Musk get approval from Tesla’s designated disclosure or securities counsel -- cheekily known as his Twitter Sitter -- before communicating material information to investors.

The agreement was amended in April 2019, after Musk clearly ignored it, to require pre-approval for certain categories of posts, including tweets about “events regarding the Company’s securities (including Musk’s acquisition or disposition of the Company’s securities).”

But a Twitter poll is just that: a nonbinding theatrical exercise. There’s been no regulatory filing indicating an actual sale. It’s also possible that Musk actually pre-cleared his weekend tweets with Tesla’s designated lawyer. If he didn’t, it’s not clear that the SEC would do anything.

Reuters contributed to this report.