Elon Musk’s Twitter Poll Results Favour Tesla Stock Sale
Billionaire CEO pledged to abide by vote’s outcome.
Billionaire CEO pledged to abide by vote’s outcome.
Twitter users said Elon Musk should sell 10% of his Tesla Inc. TSLA -0.64% stock, a stake valued at about US$21 billion, after the chief executive polled them and pledged to abide by the outcome of the vote.
Voters backed the share sale by a wide margin, with roughly 58% in favour of a sale and 42% opposed, according to the polling data posted on Twitter. More than 3.5 million votes were cast.
“I was prepared to accept either outcome,” Mr. Musk tweeted after the poll closed.
Mr. Musk on Saturday put the potential share sale up for popular vote on the social-media platform as he waded back into the debate over how some of the wealthiest Americans should be taxed.
“Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock,” he tweeted as he launched the poll, adding, “I will abide by the results of this poll, whichever way it goes.”
Mr. Musk holds more than 17% of Tesla, a stake valued at over US$200 billion, according to the most recent available data in FactSet. One-tenth of that stake could be worth around $21 billion based on the stock’s Friday closing price of $1,222.09.
Mr. Musk and Tesla didn’t immediately respond to requests for comment after polling closed.
Mr. Musk doesn’t accept a cash salary from Tesla. His compensation package entitles him to stock awards. He typically doesn’t sell stock, though he has done so to cover taxes on past stock options. Tesla’s performance has entitled Mr. Musk to additional stock options this year. Selling shares he already holds could help the cash-poor billionaire exercise some of his vested options.
If Mr. Musk were to sell stock, now could be a good time. The current top tax rate on long-term capital gains is 23.8%, but Congress has been considering raising it. Changes in capital-gains tax rates often take effect immediately, to prevent gamesmanship.
Tesla shares have risen about 75% over the last three months.
Investors sometimes interpret stock sales by corporate insiders as a sign that leadership lacks confidence in the company. Neither Mr. Musk nor Tesla have said when a share sale would take place.
People who said they voted on the issue voiced a myriad of reasons for their decision. Luke Ma, a Tesla investor in the San Francisco Bay Area, said he took Mr. Musk’s willingness to sell shares as a sign that the billionaire is confident the stock can weather such a sale. “For shareholders, I think this is a test,” said Mr. Ma, a 45-year-old engineer who said he voted in favour of a sale.
Tesla investor Brian Teeter of Irvine, Calif., said he voted Sunday against a stock sale in part out of concern that if Mr. Musk were to unload shares, it could sink the company’s stock price. “I don’t necessarily like to see an artificial stimulus suddenly disrupt a stock’s price,” said Mr. Teeter, who is 68 and writes travel guidebooks.
Mr. Musk routinely makes unusual pronouncements on Twitter, where he now has more than 62 million followers.
Last week, the Tesla boss raised doubt about a deal between the car maker and Hertz Global Holdings Inc. when he tweeted that no contract had been signed in connection with the car-rental company’s announcement of a 100,000-car order. Last year, he tweeted that he thought Tesla’s stock was too high, sending shares lower. In 2018, he tweeted he might take Tesla private and had “funding secured” for the deal, spurring a Securities and Exchange Commission investigation. Mr. Musk agreed to pay a $20 million fine and relinquish his chairman title.
“Some people use their hair to express themselves. I use Twitter,” Mr. Musk said at a recent conference.
Mr. Musk, considered the world’s richest person after a surge in the value of his Tesla stock, previously blasted a proposed tax on billionaires that would have subjected some holdings of about 700 Americans to annual capital-gains taxes on increases in value.
“Eventually, they run out of other people’s money and then they come for you,” Mr. Musk wrote on Twitter last month.
The plan would have taxed the billionaires’ unrealized gains on publicly traded assets, so they would have owed tax annually on rising values whether the assets were sold or not. (Losses would have offset gains.) This change would have effectively eliminated the billionaires’ ability to defer capital-gains taxes indefinitely.
The plan drew strong opposition and was dropped soon after it was proposed in late October. Opponents feared that the tax could be broadened to apply to the assets of less-wealthy taxpayers, among other things.
In a tweet Saturday he said, “the only way for me to pay taxes personally is to sell stock.”
Mr. Musk’s poll drew a response Saturday from Senate Finance Committee Chairman Ron Wyden. “Whether or not the world’s wealthiest man pays any taxes at all shouldn’t depend on the results of a Twitter poll,” the Democrat from Oregon said in a statement in which the lawmaker voiced support for a tax on the income of billionaires.
Mr. Musk in September said he “would prefer to stay out of politics” after Texas Gov. Greg Abbott, a Republican, said the billionaire supported the state’s social policies. Mr. Musk, who has since said he would move Tesla’s corporate headquarters from California to Texas, has become increasingly critical of the Biden administration after his car company wasn’t invited to a White House event aimed at accelerating the adoption of electric vehicles.
Selling shares could weaken Mr. Musk’s control over Tesla. Unlike Facebook parent Meta Platforms Inc. and Google parent Alphabet Inc., Tesla lacks a dual-class of stock ownership that gives founders supervoting power over common shareholders.
Mr. Musk has some personal loan obligations pledged against his Tesla stock, according to a company regulatory filing.
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: Nov 8, 2021
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Competitive pressure and creativity have made Chinese-designed and -built electric cars formidable competitors
China rocked the auto world twice this year. First, its electric vehicles stunned Western rivals at the Shanghai auto show with their quality, features and price. Then came reports that in the first quarter of 2023 it dethroned Japan as the world’s largest auto exporter.
How is China in contention to lead the world’s most lucrative and prestigious consumer goods market, one long dominated by American, European, Japanese and South Korean nameplates? The answer is a unique combination of industrial policy, protectionism and homegrown competitive dynamism. Western policy makers and business leaders are better prepared for the first two than the third.
Start with industrial policy—the use of government resources to help favoured sectors. China has practiced industrial policy for decades. While it’s finding increased favour even in the U.S., the concept remains controversial. Governments have a poor record of identifying winning technologies and often end up subsidising inferior and wasteful capacity, including in China.
But in the case of EVs, Chinese industrial policy had a couple of things going for it. First, governments around the world saw climate change as an enduring threat that would require decade-long interventions to transition away from fossil fuels. China bet correctly that in transportation, the transition would favour electric vehicles.
In 2009, China started handing out generous subsidies to buyers of EVs. Public procurement of taxis and buses was targeted to electric vehicles, rechargers were subsidised, and provincial governments stumped up capital for lithium mining and refining for EV batteries. In 2020 NIO, at the time an aspiring challenger to Tesla, avoided bankruptcy thanks to a government-led bailout.
While industrial policy guaranteed a demand for EVs, protectionism ensured those EVs would be made in China, by Chinese companies. To qualify for subsidies, cars had to be domestically made, although foreign brands did qualify. They also had to have batteries made by Chinese companies, giving Chinese national champions like Contemporary Amperex Technology and BYD an advantage over then-market leaders from Japan and South Korea.
To sell in China, foreign automakers had to abide by conditions intended to upgrade the local industry’s skills. State-owned Guangzhou Automobile Group developed the manufacturing know-how necessary to become a player in EVs thanks to joint ventures with Toyota and Honda, said Gregor Sebastian, an analyst at Germany’s Mercator Institute for China Studies.
Despite all that government support, sales of EVs remained weak until 2019, when China let Tesla open a wholly owned factory in Shanghai. “It took this catalyst…to boost interest and increase the level of competitiveness of the local Chinese makers,” said Tu Le, managing director of Sino Auto Insights, a research service specialising in the Chinese auto industry.
Back in 2011 Pony Ma, the founder of Tencent, explained what set Chinese capitalism apart from its American counterpart. “In America, when you bring an idea to market you usually have several months before competition pops up, allowing you to capture significant market share,” he said, according to Fast Company, a technology magazine. “In China, you can have hundreds of competitors within the first hours of going live. Ideas are not important in China—execution is.”
Thanks to that competition and focus on execution, the EV industry went from a niche industrial-policy project to a sprawling ecosystem of predominantly private companies. Much of this happened below the Western radar while China was cut off from the world because of Covid-19 restrictions.
When Western auto executives flew in for April’s Shanghai auto show, “they saw a sea of green plates, a sea of Chinese brands,” said Le, referring to the green license plates assigned to clean-energy vehicles in China. “They hear the sounds of the door closing, sit inside and look at the quality of the materials, the fabric or the plastic on the console, that’s the other holy s— moment—they’ve caught up to us.”
Manufacturers of gasoline cars are product-oriented, whereas EV manufacturers, like tech companies, are user-oriented, Le said. Chinese EVs feature at least two, often three, display screens, one suitable for watching movies from the back seat, multiple lidars (laser-based sensors) for driver assistance, and even a microphone for karaoke (quickly copied by Tesla). Meanwhile, Chinese suppliers such as CATL have gone from laggard to leader.
Chinese dominance of EVs isn’t preordained. The low barriers to entry exploited by Chinese brands also open the door to future non-Chinese competitors. Nor does China’s success in EVs necessarily translate to other sectors where industrial policy matters less and creativity, privacy and deeply woven technological capability—such as software, cloud computing and semiconductors—matter more.
Still, the threat to Western auto market share posed by Chinese EVs is one for which Western policy makers have no obvious answer. “You can shut off your own market and to a certain extent that will shield production for your domestic needs,” said Sebastian. “The question really is, what are you going to do for the global south, countries that are still very happily trading with China?”
Western companies themselves are likely to respond by deepening their presence in China—not to sell cars, but for proximity to the most sophisticated customers and suppliers. Jörg Wuttke, the past president of the European Union Chamber of Commerce in China, calls China a “fitness centre.” Even as conditions there become steadily more difficult, Western multinationals “have to be there. It keeps you fit.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual