What SEC scrutiny? Elon Musk asks Twitter users whether he should sell 10 percent of Tesla, and majority back share sell-off poll
Elon Musk is once again skating dangerously with the US financial regulator, after he took to Twitter at the weekend with an usual request.
On Saturday Elon Musk tweeted a poll for Twitter users, asking them whether he should sell 10 percent of his stake in Tesla in order to pay tax.
“Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock,” Musk tweeted on Saturday. “Do you support this?”
Musk has tweeted previously that he takes no salaries or bonuses from his companies. However he has sold shares before.
Over 3.5 million users voted in the poll, with 57.9 percent saying yes he should sell the 10 percent stake.
However 42.1 percent of voters said no.
That positive result saw a 5 percent fall in Tesla’s share price in pre-trading on Monday.
US Democrats have proposed tackling the gap between the wealthiest Americans and everyone else by introducing a tax that the 700 billionaires in the US would pay on the annual increase in the value of stocks and shares they own.
Currently, tax is only due when gains are “realised”, which means the holder only pays when they sell the stock and book the profit.
This means that if Musk does sell the shares, it will result in him having to make a huge tax payment, as the 10 percent Tesla stake is thought to be worth in the region of $21bn (£15.5bn).
Thanks to his shareholdings in both Tesla and SpaceX, Elon Musk has a paper fortune of approximately $338bn.
But Musk could, once again, find himself in hot water with the US financial regulator, the US Securities and Exchange Commission (SEC).
In June it emerged that the SEC had notified Tesla that two of Musk’s tweets from 2019 and 2020 – one about Tesla’s solar roof production volumes and one about the company’s stock price – hadn’t received the required pre-approval.
And now Musk could find himself in trouble once again if he does not sell the shares, because announcing his intention to sell has affected the share price of Tesla.
It should be remembered that for a number of years now, Elon Musk has been treading a very fine line with the SEC.
The US financial regulator has previously sought to remove him as CEO and any executive position within Tesla.
The issue with the SEC began in August 2018, when out of the blue, Musk tweeted that he was considering taking Tesla private and that he had secured funding to do so.
Musk was almost immediately hit with two lawsuits which alleged that Musk’s Tweets were fraudulent effort to attack short sellers.
These tweets brought Musk to the attention of the SEC, which accused Musk of securities fraud, and alleged he made a series of “false and misleading” tweets about potentially taking Tesla private.
Indeed, the SEC sued Tesla and sought to ban Elon Musk from acting as an officer or director of a publicly traded company.
In the end, the US financial regulator forced Musk to step down as chairman of Tesla and pay $20m in penalties.
Musk however was allowed to retain the CEO role.
Musk also had to submit any public statements (including tweets) about the company’s finances to vetting by its legal counsel before publishing them.
And it should be remembered that Musk did not exactly endear himself to the SEC after he publicly attacked the watchdog – on two occasions. In December 2018 for example, Musk publicly admitted that he had “no respect” for the SEC.
And senior SEC officials were also not happy at Musk, feeling he got away lightly in the SEC agreement.
In May 2019 SEC commissioner Robert Jackson made clear he did not support the agreement reached between Musk and the SEC.