Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[Knightshade]

Per our CPA, it absolutely is.

You donate the shares, you DON'T cash them out. You then get the full tax write-off value of the shares at the time of donation, but don't pay any capital gains tax because you didn't "realize the gain" and cash them out.

Gains are realized for these options when you exercise

Even if he sold 0 shares he'd realize the gains between the strike and the current market value at time of exercise.

He could offset SOME of the owed taxes by donating old shares... but there's an AGI cap for donating anything but actual cash... I wanna say it's 30% of AGI or in some cases you can get it a bit higher... but it's very far from 100%.


So I suppose in theory he could donate old shares with market value equal to 30% of the taxes owed on the options and offset that much of the bill... then still need to sell roughly 8.2 million "new" shares to pay the rest of the bill to the IRS.

But seems that'd just reinforce the narrative of rich guys avoiding taxes.

 

[Cosmacelf]

With everyone speculating what Elon would do with the cash, I believe the greatest possibility is that he will invest more in one of his present companies other than Tesla, or start a new one.

Obviously it will be TITS.

 

[Cosmacelf]

I have no problem with Elon selling 10% of his total shares. What I find most surprising, as a Tesla investor, is Elon's tweet "I will abide by the results of this poll, whichever way it goes", as if a Twitter vote is some source of truth. Twitter can be a source of useful information, but it is also a source of (crypto) scams and people who want Tesla to fail.

He posted the abide tweet about an hour after his 10% tweet. According to polling statistics, he was 99% sure which way the poll was going to go at that point. Ergo, he wanted to sell all along (option exercise taxes) and he’s just trolling everyone and giggling about it.

 

[navguy12]

I went to check the result of the poll and see Elon is being political. He changed "abide".






View attachment 730314

Maybe this is all a public service announcement: something to the effect like George Baily said before a run on his Savings and Loan, that “the cash isn’t sitting in a vault somewhere, its (invested in various enterprises that are raising peoples standards of living)“ etc…

 

[Paracelsus]

I absolutely think it is a low probability @SunCatcher. But consider for just a moment the very act of Elon so publicly entertaining the idea of not selling. That possibility never even existed in the minds of MM’s just moments before the Tweet. This was serendipitously also an act of legalized cruel & unusual punishment to those who had made a career punishing Elon and his team, and slowing their efforts to advance a more sustainable planet.

I sincerely hope and believe that a 4D Chess player like Elon has found some satisfaction in this surprise move that must have made some MMs that might have gone too far out on a limb wondering if they need to suddenly hedge against their previous hedges IMO. So I don’t think Mondays trading will be as simple as a 10% drop followed by a recovery from people buying the dip. No way. Elon just infused confusion into the minds of those tasked with confusing the minds of retail investors. Boss move as @mongo pointed out.

Elon was glad to publicly humiliate the CEO of Robinhood for halting GameStop trading when shares weren’t readily available and Hedgies were getting eviscerated. He stood up against WS and MMs for the benefit of all of us. And now after both the Hedgies and Robinhood were let off the hook by the SEC, we find Elon’s own TSLA in a gamma squeeze with MMs believing that they will soon be able to cover their short positions with the 2% of TSLA float that Elon should be bringing to the market soon. But then in full Saturday College Football Game Day-Lee Corso-style Elon says “Not So Fast my friends……….I will let Twitter decide your fate”. I love it! What a stud. Because the MMs know Elon’s principles are important enough to him that it is within the realm of possibilities. Elon is playing the role of The Man in Black. He has placed the wine on the table in the form of a Twitter post and the MM’s are no longer confident which glass contains the iocane powder.

We can’t know if the last few weeks have smelled a bit like GameStop behind the scenes in this period of very unusual trading. But we do know Elon is willing to take a stand against such behavior in a most public way when necessary. And while my gut tells me this is just a taunting - I am enjoying the moment - and I am looking forward to the next Tweets from Elon when he ‘taunts them a 2nd time’

 

[Cosmacelf]

Can someone explain how Elon exercising his options will work. Does he end up buying back the shares he has just sold? Will he end up with more of less shares than he has today? Could his buying (exercising) cause a squeeze to counteract tomorrow's sell off?

SP could go up regardless. Elon selling could be seen by the BM funds to be their last chance at getting to equal weight. They need to buy many more than Elon is selling.

On these kind of employee stock options, you are allowed to sell the stock you just bought to pay for the stock you just bought. So, he will buy 22M shares at $6.24. He will then owe $124M to pay for this. He will then also owe $12B in taxes. To cover that expense, he would then normally sell about 11M of those 22M shares at $1100 to pay for the tax and the 22M shares. But to get to 10% sales, he’ll have to sell a bit more, like 17M shares. So in the end Elon walks away with $6B cash (after taxes) and a net increase of about 5M shares of Tesla in his holdings. Rough numbers…

 

[hacer]

Total boss move: Twitter votes no, Elon lets options expire. Governments lose out on more money than Elon would have gained.

And share price rallies because no dilution! Win Win.

 

[Stretch2727]

So now that the float is increasing by 2% with him selling, I would think S & P will increase the factor where S & P index funds need to hold more shares.

During S & P inclusion I remember that all of Elon's shares were excluded from the valuation to set the % of the S & P index.

 

[kbM3]

@Knightshade

Although you’re correct that Elon will pay more tax selling shares now rather than at exercise, there is 1 partially offsetting advantage gained and 1 other possible advantage.

1. He’s raising his cost basis, by selling shares with the lower cost basis, rather than the shares with the high cost basis he will acquire from the options. And this could be even more advantageous when selling stock later, if taxes do increase in the future.

2. If the share price is higher now than at the time he exercises the options. Although this could obviously go the other way as well.

 

[Singuy]

https://twitter.com/x/status/1456738781193768969

 

[Artful Dodger]

Note that Elon's twitter account has gained 0.2 million "followers" in the past day. This poll is being gamed heavily by a drone swarm of bots. Elon owes no loyalty to the mob on twitter.

I think he should just do what he thinks is best. Personally, I'd wave the stock options and declare the 2:1 stock dividend instead. After the shortzes have firmly bitten the hook. Abide that!

BTW, that $12B in forgone Federal tax receipts would have paid for 2.67M car rebates for EVs made in UAW shops. Schadenfreude for ~6 yrs worth of Fremont 3/Y production.

 

[Discoducky]

a net increase of about 5M shares of Tesla in his holdings. Rough numbers…

Very important for folks to realize Elon's ends up being *more* invested in Tesla and would be driving harder the advent of sustainable transportation.

 

[SunCatcher]

"Texas Institute of Technology and Science, University of Plano Plato"

Fixed that for you;

Why is Plato important to history?

The Athenian philosopher Plato (c. 428-347 B.C.) is one of the most important figures of the Ancient Greek world and the entire history of Western thought. ... In the “Republic,” his most famous work, he envisioned a civilization governed not by lowly appetites but by the pure wisdom of a philosopher-king.

 

[Singuy]

Note that Elon's twitter account has gained 0.2 million "followers" in the past day. This poll is being gamed heavily by a drone swarm of bots. Elon owes no loyalty to the mob on twitter.

I think he should just do what he thinks is best. Personally, I'd wave the stock options and declare the 2:1 stock dividend instead. After the shortzes have firmly bitten the hook. Abide that!

BTW, that $12B in forgone Federal tax receipts would have paid for 2.67M car rebates for EVs made in UAW shops. Schadenfreude for ~6 yrs worth of Fremont 3/Y production.

Don't you think there are more incentives for bulls to buy bots than shorts? Millions of Tesla bulls hence the current stock price, just a few shorts now hence the decrease in demand for sturdy ropes.

 

[MXWing]

Alright, let's put our votes where we think our mouth is at when it comes to price action at the close on Monday.

Given the passage of YES to Elon's Twitter Poll - Where do we end up at the close on Monday?

I'm going to guess -5% down. My rationale is some will sell. However, some have to realize Elon isn't going to login to his Robinhood account and sell 10% the same way us retail would.

teslamotorsclub.com

Trying to calm the f down and think rationally - I think the market will realize Elon can't pull a WSB style YOLO move. He can't login to his Robinhood app and just sell 10% or fat finger and sell 100% at market.

I picked 5% down. Thinking there will be some fear selling, shorties riding momentum.

Smart money should know it's not a big in the end - however, I still would have preferred Elon not do this.

 

[bobinfla]

Hmmm. This whole weekend's discussion about Elon twitter-crashing the stock, and all the dangers of using margin, made me log in and see how much margin I have available at the moment. Turns out to be quite a lot.

I don't normally use margin, last time I did it was during May/June 2020 during the Covid crash, which worked out very well. So Monday may be very interesting.

 

[EVDRVN]

Elon should donate some shares to Tesla employees, nice work-hard bonus and moat jab to the unions. Make it have a hold stipulation. I get a 1% finders fee of course.

 

[StealthP3D]

Good point - Perhaps Elon has figured that substantially increasing the float of available shares is the only way to stop BM funds bidding TSLA up far beyond the current price - which would have brought with it the downsides on recruitment and employee retention many have mentioned here in the past.

That is a very realistic possibility and one that I was concerned about starting around the time TSLA first broached $1200/share. It's not good for the stock or the mission for TSLA to run too far ahead of current fundamentals. TSLA has shown an uncanny ability to grow more rapidly than any large industrial company in this era and a good degree of that should factor into the current valuation. But to factor it all in (minus the time value of money), leaves us with a stock that can only grow at the rate the time value of money allows it to. It's much better for TSLA's valuation to continue to grow as Tesla proves it can continue to execute at a superior level to the competition (which is still primarily ICE cars, lest anyone has forgotten this fact).

Elon has knocked the share price down before (to the benefit of long-term shareholders) and I must assume he will continue to do it again at key inflection points whenever it will benefit the overall mission. Elon knows the effect of such actions will be short-lived because, ultimately, the company is valued on it's growth and productivity, not Elon's Tweets. Even though we know this, some shareholders still react like preschoolers having a fit. The share price never goes down very far, nor does it stay down for very long, but people continue to have fits over Elon's Tweets. They are blind to what he is really doing and I get tired of calming these moaners and complainers down and telling them it will be alright. It's the same people almost every time and it's as if they are incapable of learning anything from past experience. Each time Elon Tweets something these people think is improper or controversial, it's the same thing all over again!

It wouldn't surprise me to see the share price continue to rally well past $1400 in the coming several weeks. If that happens, I shiver to think of what would have happened without the Tweet. Because hyper-rallies that extend beyond Tesla's natural rate of growth are not sustainable and do a disservice to regular shareholders, employees of the company (both future and present), media perceptions, analysts reports and potential new customers. A relatively stable and consistently rising share price is far better than a spastic, unpredictable share price. I don't mind volatility myself but most people can't process it very well and it ends up reflecting poorly on the company and their mission.

When will people come to their senses and learn these basic truths?

 

[ReddyLeaf]

It may be possible in principle to reduce taxes payable by paying the long-term capital gains on existing shares, then NOT needing to sell a portion of any newly vested shares immediately to pay taxes (presumably a short-term capital gain?)…….snip…..Elon could likely borrow against his assets to pay these taxes, with his current net worth being North of $338B……snip....I think Elon still has some hard feelings toward Alameda County and the State of California for his perceived treatment with the 9-wk Fremont shutdown during covfefe. That is likely at least part of the reason he's moved away from California (as he promised)

I’m definitely not an expert here, but what would happen if Elon said #$@&you and didn’t exercise those options? I would propose that the state of California and the US govt get ZERO because the options would expire and there is nothing to tax. Of course, Elon also gives up his 50% of the gains as well. When I received employee stock options, it was at the market price at the time, thus no financial incentive at the time granted (so no immediate taxable effect on either the company or individual). Some of those I exercised and paid taxes on the gain (difference between issued strike and current price at the time of exercise). Others, I left unexercised and never paid any taxes on (because they were underwater).

Crazy? Maybe so, but Elon could negotiate future incentive options, never set foot in CA again, and those options wouldn’t be taxed by CA. Maybe a great negotiation tool with various govt officials.

 

[bkp_duke]

Gains are realized for these options when you exercise

Even if he sold 0 shares he'd realize the gains between the strike and the current market value at time of exercise.

He could offset SOME of the owed taxes by donating old shares... but there's an AGI cap for donating anything but actual cash... I wanna say it's 30% of AGI or in some cases you can get it a bit higher... but it's very far from 100%.


So I suppose in theory he could donate old shares with market value equal to 30% of the taxes owed on the options and offset that much of the bill... then still need to sell roughly 8.2 million "new" shares to pay the rest of the bill to the IRS.

But seems that'd just reinforce the narrative of rich guys avoiding taxes.

I said shares, not options. Elon was talking about selling SHARES in his tweet.

He takes the gains from the SALE OF SHARES, then uses that to pay for the OPTIONS exercise.