(CNN Business) – What is Elon Musk doing with the billions he raised in the last two months from the sale of Tesla shares?
It seems possible, even probable, that he will invest at least part of the money in SpaceX, the other company of which he is CEO and main shareholder.
Most of the proceeds from his $ 16.4 billion from the sale of Tesla shares since Nov. 8 will go to pay an estimated $ 11 billion federal tax bill, leaving Musk with more than $ 11. 5,000 million to do what it deems appropriate.
Even if he ends up paying $ 2 billion in additional income tax to the state of California, where Tesla was headquartered for most of the year when it was granted options that it will now have to pay taxes on, Musk will be left with savings of more than US $ 3 billion. And his recent move of both his own residence and Tesla’s corporate headquarters to Texas, with its zero state income tax, makes it unlikely that he will have to pay the highest possible tax to California.
Perhaps most telling: Some footnotes in the presentation revealing the details of the sales, along with the timing of the last two capital injections into SpaceX, raise the possibility that Musk is trading some of his wealth from Tesla, which is publicly traded, to shares of its private company SpaceX.
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These operations are unheard of for Musk, America’s highest-profile CEO. It is the first time in 12 years that Tesla has gone public that it has kept cash from the sale of that company’s stock, rather than selling just enough shares to pay the tax bills that lie ahead.
Their timing is good, as sales free up cash at a time when Tesla is doing very well in the market, becoming the sixth trillion-dollar company in history, and elevating Musk himself to the status of richest person on the planet. And he also does so at a time when his other high-profile company, SpaceX, is in the market raising hundreds of millions in cash to fund his ambitious goals. These two facts, along with the details revealed in the various files, certainly raise the possibility that it is pumping money into SpaceX.
Neither SpaceX nor Tesla responded to requests for comment on how Musk is using the proceeds from its stock sales.
Most of Tesla’s shares are sold to cover the payment of taxes
Musk sold 10.3 million shares on the same days he exercised options to buy another 22.9 million shares of Tesla. The sales took place on 11 different days between November 8 and December 28.
Those options expired on August 13, 2022, so it made sense for him to use them to buy the shares. But, once it did, the value of the stock, minus the modest exercise price, became taxable income.
Musk sold shares immediately after exercising the options, with the filing with the SEC noting that the transactions were made “solely to satisfy the filing person’s tax withholding obligations related to with the exercise of stock options ”.
But not all.
The most recent sales include the notation that 219,000 shares that were sold on December 28 were “only” to cover their tax bill. Another 715,000 shares he sold that same day, which brought Musk $ 776 million, were “partially used to satisfy” his tax bill, according to the statement.
The next day, SpaceX made its own filing with the SEC, revealing that it had obtained $ 337.4 million in new equity investments from an undisclosed investor.
And it is not the first time this year that a sale of Tesla shares by Musk for purposes other than paying taxes is closely followed by SpaceX’s notification of a new injection of capital.
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Between November 9-11, Musk sold 5.4 million shares, raising $ 5.8 billion. They were shares that he had in a trust, not shares that he had just acquired as part of exercising options. And while your tax bill is likely to be much lower from the sale of those shares, it’s still substantial – about $ 1.2 billion in long-term federal capital gains taxes, leaving you about $ 4.6 billion.
There is no indication in the files as to why he made those sales, which mark the first time he has sold shares that he has owned for a long period, rather than those he just acquired through the exercise of options.
It could be because he wanted to follow the result of a poll on Twitter asking his followers if he should sell 10% of his stake to increase his taxable base. But it is equally possible that the motivation was to provide much-needed cash to SpaceX.
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On November 15, a few days after it made that unusual share sale of its trust, SpaceX revealed that it had obtained $ 388 million in additional equity investments from an undisclosed investor.
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This injection of money came at an important time.
In an email sent to SpaceX staff just before Thanksgiving, Musk warned that the company was facing a liquidity crisis due to problems developing the Raptor rocket engines and Starship rockets needed to launch its satellites. Starlink in 2022. Starlink is a constellation of satellites designed to provide high-speed internet service from orbit.
“We face a real risk of bankruptcy if we cannot achieve a Starship flight rate of at least once every two weeks next year,” according to the email reported by Space Explored and also by CNBC. Musk’s email said the company needed virtually all employees to be on duty through Thanksgiving weekend to fix problems.
He also said the company planned to increase production of the ground stations needed to connect Starlink customers to the internet. He said he would make “several million units a year”, which, he said, “will consume enormous capital.”
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In a tweet that followed the email reports, Musk said the problem with the Starship rocket and its Raptor engines were being “fixed.” But in another tweet on December 29, he said that the Starship rocket’s first orbital test launch was delayed until the end of February due to the need to obtain approval for the unmanned flight from the FAA.
SpaceX and NASA also did not respond to questions from CNN Business about the email sent to SpaceX staff.
If SpaceX can troubleshoot its Starship rocket and Raptor engines and get Starlink up and running as planned, SpaceX’s value, already estimated at more than $ 100 billion, could skyrocket. The money Musk and other investors have invested in it could be a financial bonanza once the company goes public.
SpaceX raised $ 1.2 billion in equity investments previously, ahead of these two most recent capital infusions. Although the names of those who bought those additional shares are not public, the amounts of the four separate infusions were disclosed in SEC files.
It’s unclear how much cash Musk had to invest in SpaceX before he started selling his Tesla shares on November 8.
The vast majority of his net worth, estimated at $ 275 billion, comes from the nearly $ 250 billion worth of Tesla shares and options he owns, as well as a portion of money from his undisclosed stake in SpaceX. If Musk was going to make additional investments in SpaceX, the sale of Tesla shares was the most likely way to go.
The email sent to SpaceX staff just before Thanksgiving is not the first time Musk has discussed the financial challenges and money drain of getting Starlink’s internet service up and running.
“SpaceX needs to go through a deep negative cash flow gulf over the next year or so to make Starlink financially viable,” he tweeted in February. “All the new constellations of satellites in history have gone bankrupt. We hope to be the first to not do so ”.
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Here’s what Elon Musk will likely do with those billions of dollars from Tesla stock sale – KESQ