Tesla to make "exciting announcement on Thursday" (correction Tuesday)

[TurboFroggy]

A self balancing two wheel Tesla that can go 0-60 in 4 seconds...

 

[Bresson]

Maybe a Tesla car rental company?

 

[ItsNotAboutTheMoney]

Maybe a Tesla car rental company?

That would be nice, but something for the future. Thing is, if you don't have an electric car you'd not going to have an L2 charger. It would make a great deal of sense for Gen III, if Gen III has a lower range.

Right now, The Tesla Taxi Company would be a different matter...

 

[jvonbokel]

My prediction (that I will put money on):

Elon will announce completion of 10,000th model S production vehicle and he will exercise 6,711,972 shares of Tesla stock received as part of his performance objectives. This will provide the company with $44.5M of cash assuming an exercise price of $6.63. He may or may not sell some of those shares immediately to cover taxes associated with the sale. My guess is that he will sell just enough shares to cover taxes, but hold the remaining amount.

Good call! I forgot all about those options. My only quibble with your analysis is that if he's just exercising the options (buying the shares), there will be no tax implications. The taxes would be due (on the gain) when he sells them, but Musk is smart enough to wait a year to do that so he can pay the long-term capital gains rate, and also it shows he still strongly believes (to the tune of $40M+) that Tesla will be even more valuable in the future than it is today. As far as putting his money where his mouth is, that fits perfectly. Then the question is, what will Tesla Motors do with that cash infusion? My guess is accelerate the rollout of Superchargers, but I'm not terribly confident of that. I think it's more likely that it's something completely unpredictable (i.e. something nobody has suggested here yet).

 

[carrerascott]

Still trying to decide if I should try to change my factory tour scheduled for Monday April 1, to Tuesday April 2 -- the "big announcement day." Maybe he'll announce all people on the tour will get free Model X's.

 

[PureAmps]

Good call! I forgot all about those options. My only quibble with your analysis is that if he's just exercising the options (buying the shares), there will be no tax implications. The taxes would be due (on the gain) when he sells them, but Musk is smart enough to wait a year to do that so he can pay the long-term capital gains rate, and also it shows he still strongly believes (to the tune of $40M+) that Tesla will be even more valuable in the future than it is today.

Unfortunately, this is not the case thanks to the incredibly complicated US tax code. Exercising an ISO option is taxable event under the Alternative Minimum Tax (AMT) rules. Under those rules, the taxpayer must pay taxes at the AMT rates on the difference between the current stock price (currently ~$37) and the exercise price ~$6 even if they do not sell the stock at that time. So under AMT rules, Elon would have a $207M taxable event (6.7M shares x $31/share gain) that would be taxed at AMT rates. Many people opt to sell some shares immediately to pay the AMT tax on the shares they intend to buy and hold.

One more thought. Elon has access to many sources of financing that your average person does not, so it is also possible he will just borrow the money to pay the taxes and pledge the shares he purchases as collateral. In which case he will not sell any shares. He has previously financed share purchases via Goldman Sachs.

 

[jvonbokel]

Unfortunately, this is not the case thanks to the incredibly complicated US tax code. Exercising an ISO option is taxable event under the Alternative Minimum Tax (AMT) rules.

Aha, I was not familiar with AMT rules, but you appear to be spot on (nice source referencing!).

Side note, just out of curiosity: Under those rules, when the shares are eventually sold, is the cost basis (for calculating gain/loss) then equal to the market value at the time of exercise?

 

[Norbert]

OK, I'm willing to put my money where my mouth is: I'll take a $10 bet from every person who posted a theory here that you are all wrong.

Meaning, we have to pay you only if *all* theories are wrong, while you pay those whose specific theory is correct?

 

[K5ING]

I think you're all wrong. He's actually going to be introducing a new line of men's cologne. :tongue:

 

[DrComputer]

Or maybe he's going to personally fund the TESLIVE event and invite every Tesla owner at his expense :smile:

 

[malcolm]

I hope he's going to do more than simply install existing solar panel technology on more rooftops.

I hope he'll announce he's going to re-engineer them completely and dramatically improve panel efficiencies.

But why the link with Tesla?

Meh

Maybe he's getting married. Again. That can prove quite expensive.

 

[vfx]

Some good guesses.

I'm still happy with him buying a block of Model S for some good use. Rental, charity, gov.

I also like a reward offer for a task completed. Cars driven over 400 miles, race across the country, most miles in a year. Elon likes betting.

A Elon race team is intriguing.

And Solar. Solar is a great guess but it has to have a Tesla tie in. On Tesla customer homes and businesses. The (serious) announcement of a Tesla backup battery. Elon starting construction of a new solar generating plant (with all Tesla batteries).

 

[ElectricVehicle]

It's possible some on this forum may want to restore "balance" to the MarketWatch comments:

MarketWatch (aka Wall Street Journal) tesla-stock-jumps-after-elon-musk-tweets-big-plans/

 

[Norbert]

Just thinking... doesn't the addition of the sentence "Am going to put my money where my mouth is in v major way"
mean that while perhaps everyone will agree it's an exciting announcement, that not everyone will immediately be sure of its success?

(And "v major" means that it's something larger?)

 

[malcolm]

Actually, forget solar panels, he's REALLY going to take a shot at Fusion.

Although the car-sized one won't be available immediately

 

[Norbert]

And Solar. Solar is a great guess but it has to have a Tesla tie in. On Tesla customer homes and businesses. The (serious) announcement of a Tesla backup battery. Elon starting construction of a new solar generating plant (with all Tesla batteries).

Also Tesla might announce if/where/how they will build additional solar, in case the Superchargers get used so much that the solar roof won't cover the electricity needed. (Although I wouldn't think that's what the tweet refers to.)

 

[avatar]

A solar power plant with Tesla batteries is an excellent guess. That sounds very Elon like.

 

[PureAmps]

Side note, just out of curiosity: Under those rules, when the shares are eventually sold, is the cost basis (for calculating gain/loss) then equal to the market value at the time of exercise?

No, the cost basis is still the exercise price for calculating capital gains. Like everything have to do with AMT, it is incredibly complicated. But basically any AMT you pay can later be used as a credit in future years to offset capital gains tax on any stock sold that was subject to AMT. So you eventually get the money back assuming you can actually realize those gains in future years. However, I have several friends who paid AMT, but never realized the gains due to the 2001 market crash, instead incurred a capital loss, and 12 years later are still trying to recapture AMT they paid on gains that were never realized.

In summary, if you are subject to AMT, you need to hire a very good tax accountant.

 

[Beavis]

Unfortunately, this is not the case thanks to the incredibly complicated US tax code. Exercising an ISO option is taxable event under the Alternative Minimum Tax (AMT) rules. Under those rules, the taxpayer must pay taxes at the AMT rates on the difference between the current stock price (currently ~$37) and the exercise price ~$6 even if they do not sell the stock at that time. So under AMT rules, Elon would have a $207M taxable event (6.7M shares x $31/share gain) that would be taxed at AMT rates. Many people opt to sell some shares immediately to pay the AMT tax on the shares they intend to buy and hold.

One more thought. Elon has access to many sources of financing that your average person does not, so it is also possible he will just borrow the money to pay the taxes and pledge the shares he purchases as collateral. In which case he will not sell any shares. He has previously financed share purchases via Goldman Sachs.

You should leave the tax talk to the pros. Some points of clarification on ISOs, NQSOs, and AMT: Elon is almost certainly not going to be in AMT with his income level. Besides, an exec cannot receive more than $100K in ISO value at the date of grant so an ISO exercise would likely be a small number for him. Non-qualified options (NQSOs), which are unlimited in the amount that can be received, don't carry an AMT preference like ISOs do. The difference between a NQSO's exercise price and FMV on the exercise date is taxable as compensation in the year of exercise and goes on the W-2.

An option exercise is not the subject of the announcement. Tweeting about a NQSO exercise of a public company would probably get him in hot water.

 

[Zzzz...]

Do not forget, Tesla Motors is also building and selling these:

Sure they sell those in a stealth mode, but may be it have something to do with an announcement?