SpaceX founder and Tesla CEO Elon Musk holds a helmet as he visits the construction site of Tesla’s gigafactory in Gruenheide, near Berlin, Germany, May 17, 2021.
Michele Tantussi | Reuters
Elon Musk unleashed a torrent of stock sales, options exercises, tax payment sales and gifted shares last year totaling nearly $22 billion. Yet even after unloading so much Tesla stock, he still owns a larger share of the company, thanks to his compensation package.
Musk sold $16 billion in shares last year and, according to a filing with the Securities and Exchange Commission Monday, gifted 5 million shares, worth nearly $6 billion, to an undisclosed charity or recipient in November. The sales and gifts bring his total to about $22 billion — a combination of tax payments, cash in his pocket and the gift.
Yet because of the nature of the options exercises, Musk actually finished the year with a larger ownership stake — and more shares — in Tesla. In 2012, Musk was awarded options on 22.8 million shares, worth about $28 billion last fall when he started selling.
The way the options exercises work is that Musk first started converting the 22.8 million options into shares. The options had a strike price of only $6.24, so he could pay $6.24 for each option and get a share of Tesla stock, which were trading at more than $1,000 last fall.
With each options conversion, he would simultaneously sell shares to pay the taxes, since the options are taxed as income. Even as he was unloading billions of dollars worth of shares to pay the taxes, he was accumulating an even larger amount of stock at the low options price — thus increasing his ownership of the company.
In total, Musk sold 15.7 million shares for $16.4 billion. Add to that the gifted shares, and he unloaded a total of 20.7 million shares. Yet he gained 22.8 million shares through the options exercise — leaving him with 2 million more shares in Tesla at the end of the year. He currently owns 172.6 million shares, giving him a 17% stake in the company, making him far and away the single largest individual shareholder.
Musk kicked off his share activity with a poll on Nov. 6, telling his followers “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?” Musk vowed to follow the results of the poll, which ended up with 58% in favor of a sale and 42% against.
In the end, he made good on the promise of selling 10% of his stake. But he gained even more back with options — giving him a round-trip-stock trip that left him with billions in cash, the largest single tax payment in U.S. history and even more Tesla shares.
Musk’s ownership — and $227 billion fortune — is likely to skyrocket again in the future. His next big pay package, which could be even larger than the 2012 award, expires in 2028.