Elon Musk's Twitter poll shaves $80.9b off Tesla's market value and raises regulatory questions

Mr Elon Musk tweeted on Nov 6 that he would offload 10 per cent of his stake if users of the social media network approved. PHOTO: REUTERS

SINGAPORE/BENGALURU (REUTERS) - Tesla chief Elon Musk's Twitter poll proposing to sell a tenth of his holdings in the electric carmaker shaved around US$60 billion (S$80.9 billion) off the company's market value on Monday (Nov 8) and raised questions about whether he may have violated his settlement with the United States securities regulator again.

Mr Musk, the world's richest person, with a net worth estimated by Forbes at US$304 billion on Monday, tweeted on Saturday that he would offload 10 per cent of his stake if users of the social media network approved. The poll garnered more than 3.5 million votes, and 57.9 per cent of the people voted in favour.

Mr Musk's poll follows a proposal by US Senate Democrats to tax stocks of billionaires to help finance US President Joe Biden's social spending plan and fill a loophole that allowed the rich to indefinitely defer capital gains taxes.

Tesla's shares were last down 4.8 per cent at US$1,162.94 after falling as low as US$1,133 earlier in the session. Tesla accounted for more than 10 per cent of all trading in US companies' stocks, according to Refinitiv data.

"Elon Mr Musk doesn't like to do things in a conventional way," said AJ Bell Investment director Russ Mould. "Holding a poll on Twitter about whether he should sell 10 per cent of his stake in Tesla might seem crazy, but one could say it is normal behaviour for him."

Mr Musk had previously said he would have to exercise a large number of stock options in the next three months, which would create a big tax bill. Selling some of his stock could free up funds to pay the taxes.

"I only have stock, thus the only way for me to pay taxes personally is to sell stock," Mr Musk wrote along with his poll. "I was prepared to accept either outcome."

However, Mr Musk's tweet renews questions about whether he is in compliance with a 2018 settlement with the US Securities and Exchange Commission (SEC) that requires material tweets about the company to be vetted by a lawyer. The SEC, which declined to comment, found Mr Musk violated that agreement in 2019 and tightened it.

Tesla was not immediately available for comment.

Mr Philip Moustakis, a former SEC enforcement attorney and counsel at Seward and Kissel LLP in New York, said if Mr Musk had failed to get the tweet cleared then it may have violated the settlement. But if the SEC took action, Mr Musk would have a "good argument" if his tweet protected shareholders by cushioning a decline in the stock price.

"Maybe by making this mini circus out of it Elon actually softened the impact on the share price because he provided an explanation to the public as to why he is selling," said Mr Moustakis.

The billionaire, known for his Twitter banter and lively interactions with followers, was fined US$20 million by the SEC for tweets in 2018 and required to step down as chairman.

With his almost cult-like following, Mr Musk has considerable power to move Tesla's stock with his comments, but murky rules make it difficult for regulators to rein him in, Reuters reported in May.

Remote video URL

Last month, Tesla became the fifth company to reach US$1 trillion in market capitalisation, joining Apple, Microsoft, Amazon and Alphabet.

Investors will be closely watching SEC filings from Tesla for any details on Mr Musk's plans. SEC rules give companies four working days to report major events.

Join ST's Telegram channel here and get the latest breaking news delivered to you.