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Elon Musk, CEO of Tesla

Saul Martinez/Getty Images

Well, Elon Musk actually did it. But not in the way investors expected.

The CEO of


Tesla

(ticker: TSLA), the most valuable auto maker, sold a slew of Tesla shares, but not the 10% he proposed in a now much-talked-about


Twitter

(TWTR) poll.

Instead, Musk exercised stock options as part of a previously arranged stock- selling plan common among corporate insiders. It just wasn’t the mother lode. The sales, disclosed Wednesday, will only stoke the debate about billionaire taxation and what comes next for Musk stock sales.

A pair of filings with the Securities and Exchange Commission show his sales were made as part of a 10B5-1 plan—the one insiders use to sell stock so they don’t run afoul of securities laws. Musk’s plan has been in place since Sept. 14, before the Twitter poll.

Musk exercised about 2.2 million stock options awarded back in 2012. He sold about 930,000 shares to pay the tax bill on the exercise.

It’s important to remember that Musk had no looming bill from the options exercise. The tax is due only when the transaction happens. And Musk exercised the options before he had to, making it a bullish trade in theory.

Exercising options early and holding the stock bought is better, for tax purposes, when an options holder believes a stock is going up. That’s because the tax rate on options exercise is the tax rate on ordinary income—and the tax rate on long-term capital gains is lower than the rate on ordinary income.

Basically, there is less tax due in total, from early exercise, if a stock is going up. Put another way, the maximum tax that an management options holder could pay with a rising stock occurs when the holder exercises the options just before they expire.

What does any of this mean? A plan to exercise options in a 10B5-1 really isn’t all that bullish, even if the exercise is early. The options were set to expire this year. And he has more than the 2.2 million management stock options he exercised— roughly 20 million more.

But the filings do mean that investors still have to wait for a filing that shows Musk sold about 17 million shares, or 10% of his total Tesla holdings.

Tesla stock rose 4.3% in Wednesday trading, bucking two days of losses following the


Twitter

poll. The

S&P 500
and

Dow Jones Industrial Average
fell 0.8% and 0.7%, respectively.

Write to Al Root at [email protected]

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