Tesla CEO Elon Musk.
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Dec. 9, 2021, was a day that was watched closely by
Social-media-fueled speculation had bulls hoping 12/9 would bring potential good news ranging from a stock split to a new product. Tesla (ticker: TSLA) didn’t give any indication something was up. It was a case of the internet doing, well, internet things.
The only thing that happened was Musk sold more stock as part of a prearranged plan to exercise expiring management stock options. The Securities and Exchange Commission filings detailing the sales were released at roughly 8:20 p.m. Eastern time.
Musk purchased another 2.2 million Tesla shares for $6.24 apiece. He sold another 934,091 shares to pay taxes on the gains. Gains derived from management stock options are taxed like ordinary income when management exercises them.
Musk has purchased about 13 million shares by exercising his stock options and sold about 5.6 million of those shares to pay the taxes. He has exercised about half of the options received from a 2012 grant. Those options were due to expire in mid-2022.
At the current pace of exercise, there is about three weeks left before Musk will be done with those options. It’s difficult to know exactly when he will be done, though. Details of Musk’s prearranged plan to exercise just aren’t known. Tesla hasn’t responded to multiple requests for comment about Musk’s stock sales.
Musk sold another 5.4 million shares that weren’t a part of options grants. He asked his
followers back in early November if he should sell stock and pay taxes on unrealized capital gains. His followers voted yes and Musk has since sold more than 11 million shares worth almost $12 billion.
All the selling has created an overhang in Tesla shares. Coming into Friday trading, the stock was off about 17% since Musk’s
Dow Jones Industrial Average
were down about 0.6% and 1.6%, respectively, over the same span.
Tesla stock managed to rise 1.3% Friday, closing at $1,017.03. The S&P closed up 1%. The Dow gained 0.6%.
Part of the problem, leading to the stock overhang, has been the pace of sales. Musk has elected to exercise options and sell stock very slowly. He could have done it all at once using a broker to manage a secondary stock offering. Instead, he has sold stock in more than 600 separate transactions.
Tesla investors probably would have preferred the sales to happen faster. But at this point, investors will just be happy when the selling is over.
Write to Al Root at firstname.lastname@example.org