Elon Musk
Frederic J. Brown/AFP via Getty Images
Stock sales from Tesla CEO Elon Musk have resumed.
And while Tesla (ticker: TSLA) moved its corporate headquarters to Texas on Dec. 1, Musk is still going to have to pay California taxes on his gains.
Musk’s new sales, disclosed late Thursday, were part of his prearranged plan to exercise expiring management stock options.
Since early November, Musk has exercised almost 11 million management stock options which were set to expire in 2022. He’s sold about 4.7 million of those newly acquired shares to pay the taxes. Gains from management stock options—the difference between the award price and the stock price at sale—are taxed as regular income.
Musk’s options let him purchase Tesla stock at $6.24 a share. His average sale price has been about $1,085.
Even though Tesla’s HQ is now 13101 Harold Green Road, Austin, Texas, Musk is still going to have to pay California personal income taxes at a rate of about 12.3%. Texas doesn’t have personal income taxes. That state relies on sales, use, property and other taxes to fund its operations.
“A lot of people are assuming that Mr. Musk, now that’s he’s become a resident of Texas, will not be taxed, in California, on any of the income he realizes from the exercise of his stock options. That’s actually not the case,” accounting expert Robert Willens toldBarron’s. “California will tax that portion of the stock option income deemed to have been earned in California.” That’s based on the number of days he worked in California from the time of the grant to the time of exercise.
Tesla wasn’t immediately available to answer what percentage of days Musk has worked in California over that span.
“He’s not avoiding California taxes by having moved to Texas prior to the time he exercised his options,” added Willens.
It looks as if Musk is simply exercising and selling stock options because he had too. He’s not timing exercises based on geographic considerations. The options were set to expire in the coming year.
In addition to the options-related purchases, Musk has sold 4.8 million shares he already held. Overall, Musk has sold about 9.5 million shares worth $10.2 billion over the past few weeks.
The Tesla CEO, of course, created a large stir when he asked on Twitter if he should sell 10% of his Tesla holdings to accelerate paying taxes on unrealized capital gains. His discretionary stock sales followed the Nov. 6 Twitter poll.
Tesla stock dropped more than 15% in the week following the poll, wiping out almost $200 billion in market capitalization. Shares have stabilized and investors have become inured to Musk sales disclosed on form 4s filed with the Securities and Exchange Commission.
Tesla stock was up about 0.6% in premarket trading Friday, following Musk’s new sales. S&P 500 and Dow Jones Industrial Average futures were flat.
Musk held roughly 170 million shares, excluding vested stock options, at the time of the poll. If his ultimate goal is to sell about 17 million shares then Musk has another 7.5 million shares to go. About 6.5 million could come from additional management stock option exercising.
Tesla hasn’t responded to multiple requests for comment about the total amount of Musk’s planned sales.
Write to Al Root at allen.root@dowjones.com
Source: finance.yahoo.com