Elon Musk sold more Tesla shares. It might not be done after all and here’s why.


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*** SINGLE USE *** Elon Musk

Patrick T. Fallon / Bloomberg


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CEO Elon Musk has finally finished exercising expiring management stock options and selling Tesla shares. {Dramatic music.} Where did he do it? There is a chance, albeit slim, for more sales of Musk shares in mid-2022.

Musk exercised another 1.6 million executive stock options on Tuesday, buying the stock for $ 6.24 a piece. He sold 934,090 to pay taxes on the gains. Stock options are taxed as regular income on exercise.

That’s all for the moment. Musk exercised all of his available stock options from a 2012 performance award. Last week, Musk said he had finished selling, excluding the pre-arranged plan for those options. purchase of management shares.

The final tally of all recent Musk sales is roughly 10.3 million shares sold as part of the exercise of stock options and taxation. About 5.4 million more shares were sold in a Twitter poll in early November asking whether he should sell 10% of his stake in Tesla (ticker: TSLA) as part of the corporate tax debate. billionaires.

Together, the 15.7 million shares sold – in nearly 900 separate transactions – represent about 9.2% of Musk’s starting 170 million shares at the time of the Twitter poll. Not quite 10% – yet.

Musk still has 2.6 million stock options from this 2012 stock option grant. Musk’s options vest or earn upon reaching performance milestones. There is another milestone for the final 2.6 million options to be acquired: Tesla must maintain a gross profit margin of 30% for four consecutive quarters.

Tesla’s automotive gross profit margin topped 30% in the third quarter of 2021. If the company can repeat that in the fourth quarter of 2021 and the first two quarters of 2022, then Musk could well earn the $ 2.6 million. ‘final options. He could then exercise them and sell about half of them to pay taxes. All of this has to happen before August, when the options expire.

There is now a difference between gross automobile profit margins and consolidated gross profit margins, but when the options were granted, Tesla’s revenue was essentially all auto sales. Tesla has changed a bit since then. Notably, the company bought SolarCity in 2016. Tesla did not respond to a request for comment on any nuance associated with the calculation of gross profit margin related to the acquisition of options.

There is a slim chance for more sales of Musk linked to exercise of options and taxation in mid-2022. Investors should not fear this sale, however. They should probably be applauding for that to happen. This would mean a strong margin performance, despite the start of new manufacturing capacities. Tesla has two new online factories in Germany and Texas. New capacity can reduce margins as fixed expenses hit the income statement as production increases over the course of a year or two.

Additionally, if the final options end up vesting, they shouldn’t have the impact on Tesla shares from the recent sell-off.

The recent sale had a big impact. From the time Musk announced the Twitter poll until the day before Musk said he was done selling, with the exception of management stock options, Tesla shares have fell about 26%. the


S&P 500

and


Dow Jones Industrial Average

fell by about 3% and 4%, respectively, over the same period. Since Musk revealed he was done selling, Tesla shares have gained around 21%. The S&P and the Dow Jones are up about 5% and 4% over this period.

Overall, Tesla stock started the era of selling Musk at $ 1,222.09. They closed Tuesday at $ 1,088.47. Through it all, Tesla stock is down about $ 134, or about 11%.

It was a mad race to end the year for Tesla shares. Shares have risen around 54% so far in 2021 after rising over 740% in 2020.

Write to Al Root at [email protected]


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