Noah Esper

Staff Writer

Nle5099@psu.edu

In a recent Twitter poll, Elon Musk asked his followers if he should sell off 10% of his shares in Tesla in response to calls for an unrealized financial gains tax. While at first, many were willing to write this off as another case of Musk’s famed eccentricity, there may have been another motivating factor causing him to sell his shares. That factor was an upcoming tax bill averaging around fifteen million dollars. The reason Musk likely has to sell off shares is to help pay for this tax bill. As the head of Tesla, he does not earn a regular income through wages, but instead is compensated through shares in Tesla’s stock value. Thus in order to make larger transactions, he has to sell some shares in order to require the necessary liquidity to cover the costs. As for the reason why this sale is coming now, it could be a combination of factors. Factors could range from the increase of taxes which were caused by a democratic government, or the recent spike in Tesla stock value making. Increased Tesla stock value makes it an optimal time to cash out on some shares. However, for those investors who are currently holding Tesla stock and are concerned about a rapid decline in share prices, it should be noted that Musk is unlikely to sell off a large portion of his shares. If he was to sell off a large portion all at once, that would cause a catastrophic chain reaction that would devalue the stock, thus negatively affecting him as well as inventors. Instead, it is believed that he will stagger out his sales in order to prevent extreme losses. One of the main reasons for the large amount being charged in taxes is that when Musk acquired the shares, he was still a resident of California. That means that he will have to pay Californian taxes on the shares, despite now residing in Texas. California is currently known for having some of the highest taxes in the country, and has been ranked as one of the worst states for business compared to other states. States like Virginia and Texas are currently seeing a surge in business expansion compared to companies from California. It is likely that this large tax bill was one of the main reasons behind Tesla’s and Musk’s decision to leave California for Texas as of last year. While Tesla has experienced unmatched growth in recent years, propelling its CEO to the title of the richest man in the world, there are some concerns for competition that could possibly unseat Tesla’s domination as the biggest electric car manufacturer. Amazon has recently announced its backing of Rivian, a new electric vehicle manufacturer. With the backing of the corporate juggernaut Amazon behind it, Rivian is set to pose a challenge to Tesla’s domination of the market. Other car companies like Ford and General Motors have also been looking to break into the electric vehicle market as the demand for electric vehicles is likely to increase as gas prices surge due to rampant inflation. Gas price increases will most likely make electric cars a more economically feasible alternative. This surge in demand, combined with increased competition, could spell trouble for Tesla. However, it is too early to give any accurate predictions. Many competitors have faced off with Tesla in the electric vehicle market, but Tesla shows no signs of stopping anytime soon.