The last sales were NOT to free up cash for TSLA but to free up cash at the expense of TSLA for something else that must not be named. TSLA currently has $21 billion on hand now and is increasing not decreasing at the current moment.
But that all is secondary to me.... I am primarily upset in the way Elon has decided to sell. He could be using dark pools to sell without dropping the price and would have ended up with more money that way, without upsetting the share price as much.
You are missing the entire Taiga for the forest, nevermind the trees: Within 5 yrs, 4 mths Elon will need to sell ~150 MILLION shares of TSLA just to pay the income taxes he'll owe on executing his CEO stock options before they expire.
How do you think Elon selling 150M shares within 5 yrs affects the SP? That's 30M/yr avg EACH YEAR. That's more than he sold in 2021, and more than he sold in 2022. EVERY YEAR, unless he sells them all at once (either ASAP, or as late as possible).
Look at the limits - first the lower time frame: Elon's excercise price is around $23/share. If the SP was still at that level (it was there 50 mths ago), then he'd owe NO INCOME TAXES (no net gain). He'd just need the $7B in cash in order to excercise the shares. Now as
@mongo showed us upthread today, Elon can get that cash by selling half the shares (ouch), or by shaking his OTHER couches to find a space $7B. Then let the SP ride up over time, and pay just capital gains taxes on subsequent sales.
Now let's look at the Upper Limit - for convenience let's just call it the ATH of $412 from Nov 4, 2021. If Elon sells 150M shares to pay his imcome taxes at $421, he gets nothing, the Gov't gets $62B, and WORSE for TSLA shareholders, $62B in capital is extracted from the Market. What effect do you think that will have on Tesla's Market Cap?
Let's use the past 13 mths as a guide. Sure some of this drop is macros. Let's factor that out: QQQ down 33% since Nov 4, 2021 while TSLA is down 72.5%. Let's attribute ALL of the difference to Elon selling TSLA and bears jumping in on the shorting opportunity. That's a 40% drop in Mkt Cap, or roughly -500B in Mkt Cap due to the selling.
So that's the estimate of our ratio of Elon's selling to the drop in Mkt Cap: Elon sold ~$40B in shares and it cost $500B in Mkt Cap, so that's approx a 12:1 ratio of shorting to selling. And that's how you estimate how Elon selling 150M shares within 5 years would affect the Mkt Cap: it'd have about the same affect as selling 1.8B shares of TSLA which is roughly 80% of the float. Yeah. Gulp. This is an unavoidable future, IMO. There IS NO dark pool big enough to float 1.8B shares of TSLA. Even the S&P 500 addtion as only about 600M shares (about a third of the selling Elon needs to do)
Where do you think that would leave the SP? Below $23? At what point in selling can he execute and not pay any income taxes? Do you see the point I'm trying to make is that BOTH alternatives (sell now, or wait to the end) winds up with a substantial dip in the SP, and Elon selling most of his shares in a lump while paying minimal taxes? Isn't it better to do this sooner, get the disruption over with, so the company can built value back into its SP?
How can we avoid this? Elon has to excercise all his stock options at a SP low enough that he can pay the income taxes in cash. And given the number of shares involved, it's better if he can afford to but more with any set amnt of cash he may have, then he'll have to sell half of the rest to pay the taxes. It's just that simple. And that's best case, if he still have the fire in his belly after this decades long grind. Maybe he'll want to get out, maybe he'll want to stay in (we're generally not helping ATM).
At any rate, this is my profound hope. And hope is a dangerous thing...
Cheers to the longs!