Tesla CEO Elon Musk.
Patrick T. Fallon/BloombergTesla CEO Elon Musk is back selling stock. All the new sales, disclosed Tuesday, took place the same day.
All of Tuesday’s sales are part of a prearranged plan to exercise expiring management stock options. And even though the options-related activity isn’t unexpected, investors still want to know when Musk’s selling will end.
That isn’t easy to figure out, but the best bet might be to assume Musk has a present for investors that he will leave under the Christmas tree.
Musk exercised another 2.15 million stock options on Tuesday. That means he bought 2.15 million shares for the exercise price of $6.24. He then sold 934,091 shares, mainly to pay income taxes. Management stock options are taxed as regular income and the compensation is, essentially, earned when a manager exercises.
This is the fourth time Musk has exercised stock options that were awarded as part of a 2012 compensation package. Musk has sold 943,091 shares each time and acquired new shares upon exercise.
Based on his prior activity, it looks as if Musk will exercise about 26 million stock options in 12 separate tranches. He has been exercising about two tranches a week for the past couple of weeks.
Overall, via prearranged options exercises and stock sales, Musk has sold about 3.7 million shares worth $4 billion in 247 individual transactions.
Musk, of course, also sold some stock unrelated to management stock options after conducting a poll on Twitter asking followers if he should sell 10% of his Tesla (ticker: TSLA) stockholdings to accelerate paying taxes on unrealized capital gains.
When Musk conducted the poll, he owned roughly 170 million shares of Tesla. Ten percent of that number comes to about 17 million shares.
Aside from sales related to stock options, Musk has also sold about 4.8 million shares worth about $5.2 billion in 254 separate transactions. Altogether, Musk sold about 8.6 million shares worth $9.2 billion in 501 separate transactions.
It isn’t clear if Musk considers the prearranged options-related stock sales as part of the 10% he suggested selling. Tesla hasn’t returned multiple requests for comment about Musk’s sales.
If Musk was to include stock acquired from the options exercise as the number with which to base his 10% sale on, his starting stake might be closer to 185 million shares. That means Musk would need to sell about 18.5 million shares outside of options-related selling. That also means Musk would have another 13 or 14 million shares to sell—in addition to any options-related sales.
That’s probably a worst case for Tesla investors, because selling a lot of stock can create uncertainty and an overhang with investors waiting for the selling to stop before putting new money to work in the stock.
Tesla stock is down about 9% since Musk’s Twitter poll. The S&P 500 is flat over the same span. The Dow Jones Industrial Average is down about 1%.
The math to get to the theoretical 10% can be calculated many ways. At this point, however, it seems fair to assume Musk planned to sell about 17 million shares in total—including all sales related to options exercise.
If that’s the case, there are another 7 million-plus shares to sell via options exercises and another 1 million to sell outside of options exercises.
At the current pace of stock sales and options exercises, investors can expect roughly four more weeks of selling.
Musk’s sales should be done by Christmas. If that’s the case, the cessation of selling with be a gift to Tesla bulls.
Write to Al Root at allen.root@dowjones.com
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