Originally published 2021-11-09.
On 6 November 2021 Elon Musk asked his Twitter followers a simple yes-or-no question: should he sell 10% of his Tesla stock? About 3.5 million accounts voted, and 58% said yes. When markets opened on Monday 8 November, Tesla shares slid, at one point falling as much as 7.5% before trading. Over the next seven weeks Musk did sell, offloading Tesla shares worth well over $15 billion by late December.
The poll looked like a stunt, but it sat on top of a serious argument about how the very rich are taxed in the United States. Here is what happened, why investors reacted, and what the episode tells us about Musk, taxes and the power of a single post.
What Musk asked, and how people voted
The question came wrapped in a short explanation about unrealized gains, the paper profits on assets that have risen in value but have not been sold. Under US federal rules, those gains are generally not taxed until the asset is sold. Musk framed the sale of a tenth of his stake as his answer to critics who said billionaires use this rule to avoid tax.
Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.
— Elon Musk (@elonmusk) November 6, 2021
Do you support this?
He told followers he would abide by the outcome either way. The final tally was 57.9% in favour of selling. According to Al Jazeera's report on the vote, a 10% stake at that point equalled roughly 170.5 million shares, worth around $21 billion, with Tesla stock closing at about $1,222 the Friday before the poll.
Why Tesla's share price dropped
The fall was less about the poll itself and more about supply. A sale of that size meant a large block of shares could hit the market, roughly 80% of Tesla's average daily trading volume over the previous three months. Traders tend to sell ahead of a known large seller, and some investors worried that the company's founder was signalling that the stock was richly valued.
The context matters too. Tesla had risen about 73% in 2021 up to that Friday and was valued at more than $1 trillion, so some profit-taking was likely anyway. Market analysts such as Dan Ives of Wedbush Securities argued that a 10% sale would add only 1.5% to 2% to Tesla's free float and would not change the company's long-term story. In other words, the poll was a trigger for the drop, but it is hard to separate its effect from the stock's earlier rally.
Did he really sell?
Yes. From the following week, regulatory filings showed a steady stream of sales, many tied to exercising stock options awarded in 2012 that were due to expire in August 2022. Exercising options creates a large tax bill, so part of the selling paid that bill. By 23 December 2021 Fortune counted about 14.7 million shares sold, worth around $15.4 billion, and Musk said he was "almost done." He also said publicly that he expected to pay more than $11 billion in tax for 2021.
The billionaire tax debate behind the poll
The poll arrived during a fight in Washington over how to pay for President Joe Biden's spending plans. In late October 2021 Senator Ron Wyden of Oregon, the Democrat who chaired the Senate Finance Committee, published a proposal called the Billionaires Income Tax. It would have taxed the yearly rise in value of assets held by people with about $1 billion in assets or very high incomes, rather than waiting until those assets were sold. The plan was not proposed by the Biden administration itself, and it was never passed.
Supporters argued that the wealthiest Americans can live for years on loans backed by their shares, never selling and so never triggering capital gains tax. Critics said valuing assets every year would be complicated, might be unconstitutional, and could force founders to sell stakes in their companies.
Wyden reacted to the poll directly, writing that whether the world's richest man pays tax "shouldn't depend on the results of a Twitter poll." Musk answered with a crude personal jab about the senator's profile picture rather than an argument about tax policy.
What we know about Musk's tax bills
Earlier in 2021 the investigative newsroom ProPublica published leaked IRS data on the richest Americans. It reported that Musk paid no federal income tax in 2018 and that his "true tax rate" from 2014 to 2018, measured against the growth of his wealth, was 3.27%. It is worth being clear about what that figure means: it compares tax paid with the rise in wealth, most of which was unsold stock. On ordinary tax rules, unsold gains are not income, which is exactly the gap Wyden's plan aimed to close.
Musk also moved his personal home from California to Texas in late 2020. California taxes high earners at up to 13.3%, while Texas has no state personal income tax. That move mattered for the 2021 option exercises, which produced one of the largest individual tax bills in US history.
A pattern of market-moving posts
This was not the first time a Musk post shook Tesla's share price. On 1 May 2020 he tweeted that Tesla's stock price was too high in his opinion, and the shares dropped by more than 10% that day before recovering in the following weeks. In 2018 his tweet about taking Tesla private at $420 a share led to a settlement with the US Securities and Exchange Commission, under which a Tesla lawyer was meant to pre-approve some of his posts about the company. Reporters asked in 2021 whether the stock poll had been cleared in that way; the answer was not made public at the time.
His posts have also landed him in court and in controversy outside finance. In July 2018 he called Vernon Unsworth, a British caver who helped in the rescue of a boys' football team from a flooded cave in Thailand, a "pedo guy." Unsworth sued for defamation in Los Angeles, and in December 2019 a jury found Musk not liable. In July 2020 a reply he posted about Bolivia, after the 2019 removal of Evo Morales, was widely read by critics as making light of a coup, and it drew heavy criticism in Bolivia.
Myths that grew around the story
- "Tesla lost 10% overnight." Early headlines said this, but the drop was smaller at first: around 4% before the opening bell, with a bigger slide over the next days as the sales began.
- "Biden proposed the tax." The Billionaires Income Tax was Senator Wyden's proposal. The White House discussed it, but it was dropped from the final spending talks.
- "Musk's wealth came from an emerald mine." His father, Errol Musk, has described a share in an emerald venture in Zambia. Elon Musk has denied the mine existed, and there is no public evidence that it funded his companies.
What the episode teaches investors
For ordinary shareholders, the lesson is that a company closely tied to one famous founder carries "key person" risk: what that person says, sells or posts can move the price regardless of the company's results. It is also a reminder that insider sales are often driven by tax or option deadlines rather than a view on the business, so they are worth reading in context before reacting.
For the tax debate, the poll did little to settle anything. It did show, very publicly, how much of a billionaire's fortune sits in unsold shares, and why the question of when such gains should be taxed is unlikely to go away.
Sources: Al Jazeera; Bloomberg; Fortune; Wikipedia: Vernon Unsworth; Deccan Herald.
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