Elon Musk's Tesla stock Twitter challenge ends in a US$100 billion market cap loss
Over the weekend, Tesla's flamboyant CEO Elon Musk issued a stock sale challenge to his legion of Twitter followers. The poll asked whether he should sell 10% of his Tesla stock holdings, worth US$21 billion at the time, to cover taxes. Mr. Musk stated that he would abide by whatever the crowd decides, though financial analysts believe he might have little choice but sell anyway since a number of his vested options are expiring this year. The language of the Twitter post suggested that the move would aim to preempt a potential unrealized stock gains legislation known as the Billionaires Income Tax.
The people spoke, and most of them went with the sell option, ultimately resulting in a US$60 billion wipeout of Tesla's market cap once the stock market opened on Monday. Ron Wyden, the senator behind the last version of the Billionaires Income Tax proposal, dismissed Elon Musk's crowdsourced Tesla stock sale survey as a "stunt," noting that:
Whether or not the world’s wealthiest man pays any taxes at all shouldn’t depend on the results of a Twitter poll. It’s time for the billionaires’ income tax.
The crux of the unrealized gains legislation is that "billionaires pay tax every year, just like other Americans," according to Senator Wyden. Currently, the multi-billion gains when the stock in their possession appreciates are remaining on paper, resulting in CEOs like Amazon's Jeff Bezos paying taxes on a US$80,000 salary, for instance. In any case, that little Twitter poll that Elon Musk put out on Saturday caused a massive 5% Tesla stock price drop on Monday, and the shares are down another 5% on market open today, indicating that there may not be many investors lining up to buy the dip just yet.
Missing out on the big Tesla stock runup this year, some fund managers shared with the Wall Street Journal they are now careful to include the electric vehicle company in their portfolio for fears it may be overvalued. It is not the first time Mr. Musk's tweets have influenced the price of various assets - from cryptocurrency to his own Tesla stock - and then the effect fizzled in a few days, so his rather public pledge to sell 10% of his Tesla holdings could turn out to be one of those.