Elon Musk Sold Tesla Stock. It Wasn’t Because of Taxes.

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Well, Elon Musk actually sold

Tesla

stock. But the initial sale wasn’t what investors expected. More sales followed his first disposition. Now investors will wonder how much more is left to sell.

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

poll.

Instead, Musk started selling after exercising stock options as part of a previously arranged stock-selling plan common among corporate insiders.

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 options holder could pay with a rising stock occurs when the holder exercises the options just before they expire.

After the filings detailing the options exercise came more paperwork. Musk sold another 3.6 million shares worth roughly $3.9 billion. Those shares aren’t associated with any plan. Those sales, presumably, are part of the 10% Musk said he would sell on Twitter.

Both sales aren’t quite the mother lode. Musk has about 13 million or 14 million more to sell to get to his 10% threshold. The sales, disclosed Wednesday, will only stoke the debate about billionaire taxation and what comes next for Musk stock sales.

What does any of this mean? Investors should expect more sales.

Musk has more than 20 million options left to exercise. 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.

Then there is the rest of the 10% to sell. Like it or not Musk appears to be doing what he said he would do and not to pay taxes or loans back, simply because he said he would if Twitter told him too.

Tesla stock was up 2.7% in premarket trading Thursday after rising 4.3% on Wednesday, 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, on Wednesday but looked set to rebound Thursday.

Write to Al Root at allen.root@dowjones.com