• e-mail

Tesla Inc. shares fell 5.4 percent in premarket trading on Monday as investors prepared for its chief Elon Musk's proposed sale of about a tenth of his $250 billion holdings in the electric-car maker following a Twitter poll.

By 10am, shares inched back up, and were only down about 2 percent from Tesla's last closing.

Musk, the world's richest person, tweeted on Saturday that he would offload 10 percent of his stock to to pay President Joe Biden's proposed 'Billionaires Tax' if users of the social media network approved the proposal.

He owns Musk owns 20.7 percent of the total Tesla outstanding shares - 193.3million shares valued at just over $250million. 

'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?' the South African-born mogul tweeted to his 62.7 million followers.

'Note, I do not take a cash salary or bonus from anywhere. I only have stock, thus the only way for me to pay taxes personally is to sell stock,' he added.

Musk, who changed his name on Twitter to 'Lord Edge,' said he will 'abide by the results of this poll, whichever way it goes.'

The Twitter poll garnered more than 3.5 million votes, with 57.9 percent of the people voting 'Yes.' 

Since then, the billionaire has only said he was 'prepared to accept either outcome,' and used crude language when responding to U.S. Senator Ron Wyden's tweet: 'Whether or not the world's wealthiest man pays any taxes at all shouldn't depend on the results of a Twitter poll. It's time for the Billionaires Income Tax.' 

The electric-vehicle maker's shares were trading at $1,156.3 before the bell, and if the losses hold, it would wipe off about $66 billion.

Now, market regulators are waiting to see if Musk will follow through on his proposal. 

Tesla founder Elon Musk took to Twitter to ask whether he should sell 10 percent of his stock in the electric-vehicle company amid pressure in Washington to increase taxes on billionaires like him

Nearly 58 percent of those who responded to the Tweet said he should sell his stock

Since then, Tesla shares have plummeted during pre-market trading

Market participants expected speculators would try to front-run his selling. Musk's stake in Tesla was about 170.5 million shares as of June 30, and a 10 percent sale would amount to about $21 billion based on Friday's closing price, according to a Reuters calculations.

Including stock options, he owns 23 percent stake in the world's most valuable car company.

In the past three months, company insiders at Tesla sold $259.62 million worth of shares, excluding dispositions of indirectly held shares, according to Refinitiv data.

'The last thing you do when offloading a massive exposure is to reveal your hand,' said Chris Weston, head of research at broker Pepperstone in Melbourne.

'The buyers tend to step away when you have an overhang like this, but this is no ordinary story and is Musk's way of getting back at the proposal to tax the elite with gains on unrealized profits.'

'The dip isn't going to last too long, because Tesla has had such a phenomenal record of bouncing back from these sort of selloffs,' added David Madden, markets analyst at Equiti Capital in London

Tesla breached a trillion dollars in market capitalization last month after rental firm Hertz signed an estimated $4.2billion deal to buy 100,000 of its cars

Musk decided to launch the poll in response to Biden's plan to tax unsold shares held by America's wealthiest people. Normally, stocks are only taxed when sold, with owners then forced to pay a percentage of any profits they've made. 

But Senate Democrats have been pushing for billionaires to pay taxes when the price of the stocks they hold goes up, even if they don't sell any shares. 

Under Biden's plan, billionaires could be taxed on 'unrealized gains' when the price of their shares goes up - even if they do not sell any of their stock. 

Musk has an option to buy 22.86 million Tesla shares at $6.24 each - a fraction of Tesla's closing share price on Friday of $1,222. The option expires next August.

These 'unrealized gains' would put Musk on the hook for millions of dollars in taxes. 

Courts now have to determine whether unrealized gains are legally considered income in order to tax them under the 16th Amendment.

The new tax could hit about 700 billionaires, but critics of the plan note that the value of assets do not always go up.

Billionaires would also pay taxes for other liquid assets such as bonds and cash - all of which can increase vastly over the years. 

It comes as Tesla breached a trillion dollars in market capitalization last month after rental firm Hertz signed an estimated $4.2billion deal to buy 100,000 of its cars.

The deal will see Hertz roll out the $42,000 Model 3's across its locations in the US and Europe by the end of 2022, and is the largest single order for electric cars ever placed.

As a result, Tesla is now just the fifth American company to be worth more than $1 trillion, joining a select club that includes Apple, Microsoft, Amazon and Alphabet.   

Musk has said he would 'abide by the results of this poll, whichever way it goes'

In October, the world’s richest man predicted that the Democrats’ plan to tax the wealthy will eventually expand to include new levies on middle class Americans. ‘Eventually, they run out of other people’s money and then they come for you,’ Musk tweeted

Musk, who is known for his sometimes flippant tweets, said he would 'abide by the results of this poll.' 

He also owns SpaceX, which analysts say could make him even more money than Tesla, and result in Musk becoming the world's first trillionaire.  

Earlier this year, it was revealed that Musk and his rival at Blue Origin, Jeff Bezos, have in recent years paid nothing in federal income tax.

Musk's wealth grew an estimated $13.9 billion between 2014 and 2018.

He reported $1.52billion in total income and paid $455 million in taxes. It equates to a 3.27 percent true tax rate.

In 2018, Musk paid no federal income tax. The records show he paid $68,000 in 2015 and $65,000 in 2017.

He has previously taken to Twitter to slam the tax plan. 

After Democrats announced their plans for a new billionaires’ tax to help pay for Biden’s social services and climate change plan in October, Musk predicted that the Democrats’ plan to tax the wealthy will eventually expand to include new levies on middle-class Americans. 

'Eventually, they run out of other people’s money and then they come for you,’ Musk tweeted.

Musk has tried to sell off much of his properties over the past two years, after he tweeted in May 2020 that he  was 'selling almost all physical possessions,' and 'will own no house.'

He has since been living in a home he rents worth $50,000 in Boca Chica, Texas near his Space Exploration Technologies Corp. Starbase rocket manufacturing plant, and sold a total of seven properties worth a total of $114 million.

He told podcast host Joe Rogan at the time he was doing it as a way to defuse criticism of his wealth.

'I think possessions kinda weigh you down. And they’re kind of an attack vector. People say, "Hey, billionaire, you got all this stuff." 

'Well, now I don’t have the stuff — now what are you gonna do?"

But Musk's flippant tweeting has also led him into financial uncertainty.

In 2018, he was fined $20 million by the U.S. Securities and Exchange Commission for tweeting that he was considering taking Tesla private at $420 a share and had secured funding. 

The SEC asked him at the time to step down as chairman.

Investors say they will now keep an eye on any response from the regulators on Musk's Twitter poll, especially because the regulator had ordered Tesla to vet any material public communications Musk made regarding the EV maker, following his 2018 tweet.