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Nov. 9, 2021, 6:03 p.m. EST

Elon Musk’s potential sale of Tesla stock comes amid looming tax bill

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Rebecca Elliott, Richard Rubin, Theo Francis

Elon Musk’s pledge to sell 10% of his Tesla Inc. stock highlights the complex financial web the world’s richest man has spun around his personal fortune.

Selling a stake valued at roughly $17 billion could provide Musk,  who has at times said he was cash-poor , with a sizable liquidity infusion. It could also go a long way toward helping the billionaire pay a bill likely coming due from the Internal Revenue Service. Completing these moves before year-end would come with the benefit of helping Musk avoid a possible tax increase next year.

Musk is worth roughly $300 billion on paper, according to the Bloomberg Billionaires Index, with the majority of that wealth tied up in Tesla and his rocket company, Space Exploration Technologies Corp. The Tesla /zigman2/quotes/203558040/composite TSLA +3.73% chief executive, who is compensated in stock awards and doesn’t accept a cash salary from the electric-vehicle maker, faces an August deadline to convert roughly 22.9 million vested stock options into shares or let them expire worthless, according to a regulatory filing.

He would need about $143 million to exercise those options, and could owe more than $9 billion in federal income and Medicare taxes upon exercising them. Under California law, Musk also likely would face a sizable state tax burden because exercised options are treated as compensation partly earned in the state while he lived there.

The tax hit that Musk faces likely would have come regardless of the political debate unfolding in Washington. Musk himself signaled at a September conference that he expected to exercise options in the fourth quarter, triggering what he called a huge tax liability.

An expanded version of this report appears on WSJ.com.

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/zigman2/quotes/203558040/composite
US : U.S.: Nasdaq
$ 952.67
+34.27 +3.73%
Volume: 11.39M
Jan. 26, 2022 12:25p
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