Picture Source: CNN
Elon Musk is a revered businessman and an iconic figure driving technology in the 21st century to the cutting edge. He is also the richest man in the world with his net worth standing at a mighty $318 billion. His net worth is so outstanding that the gap between him and the second wealthiest man in the world (Jeff Bezos) is more than $100 billion. A large fraction of his wealth is attributed to his stake of shares in Tesla. However, he has turned to an unusual source for advice as to what he should do with his stocks … Twitter.
Elon Musk recently tweeted “Much is made recently of unrealised gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?” adding a poll to his tweet so his followers could decide the outcome of his stock shares in Tesla. His poll received almost 2 million votes in just seven hours with 58% of the voters confirming he should sell his shares.
His initial decision to sell his shares stems from the massive tax that he will have to pay this year. Elon Musk faces a tax bill of more than 15 billion dollars on stock options. He commented that since he doesn’t take a salary from any of his companies, he will have to sell his stocks to make the payments. He commented on Twitter “I do not take a cash salary from anywhere. I only have stock, thus the way for me to pay taxes personally is to sell stock”.
Picture Credit: Tech Nick
However, the decision also revolves around the issue of tax avoidance through unrealised gains. An unrealised gain is an increase in value of an asset that an investor holds which has not yet been translated into cash. This has been seen as a form of tax avoidance, especially by the ultra-rich who horde financial assets such as stocks which can increase in value exponentially.
Elon Musk, as the world’s richest man, holds a lot of power through just his tweets alone. They are so influential that the slightest mention of a brand in a tweet sends their stock prices soaring, but even he needs to abide by the principals of business. Usually, an owner selling large bulks of his/her business is seen as a negative signal to investors but using the subject of tax avoidance and paying tax as the reason behind his move disperses any of that speculation. Furthermore, the whole stunt of “letting his fans decide” through Twitter creates excitement around the move and creates a large demand for his stocks.
However, as the issue on tax avoidance grows, so does the pressure from political figures for harsher tax laws on billionaires. Elon Musk opposed and criticised a proposed “billionaires’ tax” by US house democrats. Democratic senator Ron Wyden took to twitter and commented “Whether or not the world’s wealthiest man pays any taxes at all shouldn’t depend on the results of a Twitter poll”.
November 8th 2021 | 2:45 PM