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 November 8 will go to pay a federal tax bill estimated at US $ 11 billion, which will leave Musk more than $ 5 billion to do whatever it sees fit.
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 from both his own residence as of the Tesla’s corporate headquarters in TexasWith its zero state income tax, it makes it unlikely that you will have to pay as much tax to California as possible.
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.
These operations are unprecedented 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 company in history to be worth a trillion dollars, 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 a 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 “solely” 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.
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 I wanted to follow the outcome of a Twitter poll in which he asked 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.
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.
A money hungry SpaceX
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. It said it would make “several million units a year,” which it said would “consume enormous capital.”
In a tweet that followed the email reports, Musk said that the problem with the Starship rocket and its Raptor engines was going away “fixing up“. But in another tweet Dec. 29 said that the first orbital test launch of the Starship rocket 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 going as planned, the value of SpaceX, which it is already estimated at more than US $ 100 billion, it could go off. 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 US $ 275,000 million, comes from the nearly $ 250 billion worth of Tesla shares and options he owns, as well as a portion of the 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 gulf of negative cash flow over the next year or so to make Starlink financially viable,” he said in a Tweet in February. “All the new satellite constellations in history have gone bankrupt. We hope to be the first to fail.”
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This is likely Musk will do with the billions of dollars from the sale of Tesla shares.