Earlier this week, Tesla confirmed having closed its recent secondary offering with $1.7 billion in net proceeds to finance its Model 3 production program, but part of the offering was also a significant set of transactions in order for Elon Musk to exercise 5,503,972 stock options and then sell 2,782,670 shares to pay taxes.
In a SEC filing issued last night, Tesla confirmed that Musk sold the shares at $213.22 for a total of just over $593 million. After the transaction, Musk’s stake in Tesla stands at 31,100,644 shares worth just over $7 billion.
When the CEO of a company sells a large amount of shares, it is generally perceive as a bad sign, but it this case, Tesla makes an effort to highlight that Musk is selling the shares “solely in order to pay income taxes related to previously reported stock option exercises” and that he is overall a net buyer in the transaction.
Tesla is referring to two different occasions in the past few months when Musk exercised over $100 million worth of stock options, but he didn’t sell any at the time to cover the taxes.
It’s not clear how much taxes Musk will have to pay exactly, but the last exercised price was $6.63 per share so he had to pay $36,491,334 to acquire the shares in the first place – leaving around $557 million. Considering he will have to pay a normal income tax rate (52% in California) on the net gain of over $200 million in the previous two transactions and over $1.1 billion in the one closed this week, but after a donation of 1.2 million shares worth over $250 million to charity, it’s not difficult to believe Tesla’s claim that all proceeds from Musk’s stock sale will go toward paying taxes.
He doesn’t accept any salary from Tesla, but he does have a lot of stock options including a generous CEO grant of 5,274,901 stock options, which are awarded in 10 tranches when the company reaches certain milestones. Yet most of his stake in Tesla was acquired through providing a significant part of the company’s working capital during the first ~7 years after its inception (2003 to 2010).