Does Elon Musk Have Paper Hands?

Elon Musk put $21 billion of Tesla stock in the hands of his Twitter following, and the masses spoke. Now what?

Jack Raines
November 08, 2021

What Happened?

Over the last several months, there has been a ton of chatter in Washington D.C. about a potential unrealized capital gains tax on billionaires.

Rich guy number one on this list? Tesla CEO, Elon Musk.

Musk has seen his net worth leap from $23 billion in April 2020 to more than $300 billion now, largely due to Tesla's ridiculous stock melt up.

With the markets closed this past Saturday, Elon decided it might be time to offload part of his stake. Musk launched a Twitter poll asking his followers whether or not he should sell 10% of his Tesla stock.

Note that if you voted on this poll, you can now include "advised CEO on multi-billion dollar transaction" to your resume.

Musk followed up this poll by stating that he "will abide by the results of this poll, whichever way it goes". Tesla fanbois hammered "No", but curiosity and chaos won. 3.5 million votes later, 58% said that the billionaire should sell some stock. Now what?

How Much Money is $21 Billion?

Musk owns more than $200 billion is Tesla stock, with 10% of his holding worth around $21 billion. To put it in perspective, this $21 billion is worth more than:

  • Tesla's entire market cap in 2014
  • Elon Musk's net worth in March 2020
  • Zimbabwe's GDP
  • The value of the Dallas Cowboys, New England Patriots, New York Giants, and Los Angeles Rams (combined)
  • Enough to end world hunger, at least three times (at least according to the UN World Food Program)
  • Not enough to actually end world hunger three times, but enough to prevent geopolitical instability, mass migration, and save 42 million people on the brink of starvation three times
  • Enough to purchase Alaska from Russia 157 times, adjusted for 2021 dollars
  • Enough to buy every Bitcoin in existence in April 2017
  • Enough to give every living American $63.82. (Diet stimulus checks)
  • Enough to buy GameStop

This is easily the most expensive Twitter poll in history.

Why the Paper Hands?

In his tweet, Musk said that this poll is a response to claims that unrealized capital gains are tax avoidance. However, the unrealized gains change proposed by Senator Ron Wyden, the latest victim of Musk's memeing (see below), was thrown out of the revised infrastructure bill. With unrealized capital gains tax unlikely, why is Musk now flexing his paper hands?

The Top of All EV Bubble Tops?

Musk himself once said, "Fate loves irony." Is there anything more ironic than the CEO of the world's biggest automaker letting a Twitter poll determine the fate of $21 billion in stock, and the bubble implodes afterwards?

I think not.

Musk and co, against all odds, built an incredible company. They should reap the fruits of their labor. But what about the "Tesla 2.0s" that are trying to ride the OG's coattails? Let's look at valuations and cars sold:

A handful of cars sold. One truck pushed down a hill. $163 billion in aggregate market capitalization.

Keep in mind that when Tesla IPO'd in 2010, the company 1) already had sales and 2) IPO'd at $1.7B. Analysts were calling it expensive at the time.

Now let's check out some other automakers:

Look, I'm sure the Lucid Air is a fantastic sedan. I'm not so sure that a luxury sedan manufacturer with zero sales is worth the same as Ford. I'm pretty confident that EV is the future. I'm also pretty confident that the Ford Mach-E and Lightning will be top performers in this market.

I imagine that once their EV lineups roll out, Ford and company will shed their "boomer discount" and eventually trade at similar multiples to the startup gang. Why shouldn't they? They all sell cars that run on batteries.

What seems more likely: Ford to a trillion or Lucid to a billion?

When everyone is selling EVs, you can't expect the startups to continue trading at these premiums, right?

When companies don't have revenue, they can be valued on hopes, dream, projections, and themes. When companies do have revenue, they have to be valued on said revenue. Now maybe you are a first mover company with a wunderkind CEO, and you can be valued on both dreams and reality.

But only one company has both of those, and it isn't Fisker.

The wunderkind CEO knows the EV market better than anyone else, and he can definitely assess "fair value" of these companies better than most. Maybeee Musk thinks the sector is just a bit (read: insanely) pricy, and now is a good time to take some chips off. Congress certainly makes a convenient scapegoat.

Musk's Tesla FDs (We're Not Talking Full Self Driving)

The Redditors of Wallstreetbets refer to risky option contracts (typically short-term) as "FDs". Musk has 22.8 million Tesla stock options with a strike price of $6.24 expiring in August. FDs indeed. Musk will report income of ~$26 billion when he exercises these options, assuming today's closing stock price. With a 50% tax bill, he'll owe approximately $13 billion in taxes.

If taxes go up next year, he'll owe more money. Even if they don't increase next year, he'll still have to pay Uncle Sam. Selling some stock at all-time highs to pay a tax bill on billions in options isn't a bad move.

Will He Actually Do It?

That's the (21) billion dollar question. The poll spoke, and Musk stated that he was prepared for either result. We need to check historical precedent. Two and a half years ago, Musk was one of four candidates in a poll for the CEO of Dogecoin. Musk won this vote.

Musk then changed his Twitter bio to "CEO of Dogecoin." Dogecoin later became a $90 billion asset (maybe Lucid and Rivian aren't that overvalued relatively).

So yeah, I imagine that Musk will probably honor the results of this poll. What does that mean for Tesla shareholders?

It means the stock price will go down.

What happens when Tesla's stock goes down?

Tesla fanbois can afford to buy more shares.

What happens when Tesla fanbois buy more shares?

Tesla stock goes up.

I fully expect Tesla to explode through Dr. Parik Patel's price target by the end of the week.

Now What?

I guess we're going to wait for Musk to tweet a GIF of a grocery boy holding his bags, or some other meme to represent him dumping his bags on investors. And then the stock will double again, because that's what happens every time Musk does something seemingly detrimental to his own company.

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