Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, took to Yahoo Finance Live this week to talk about Tesla as well as the addition of Rivian to the EV industry. The host led with Tesla’s decline in market cap value and asked Ross how much of the decline has to do with Elon Musk selling $6.9 billion in Tesla shares, with more to come.
Elon Musk recently held a poll on Twitter asking followers if he should sell 10% of his Tesla stock to pay taxes. The majority who voted said yes, and Elon is keeping his word. It should be noted that Elon had previously mentioned to Kara Swisher at CodeCon 2021 that he would have to sell his stocks due to expiring options and would be paying a 53% tax rate. So it was no secret that he was planning to sell the expiring options.
Paying taxes is incredibly important and there’s been a huge debate as to how much Elon should pay. People think he should pay his fair share (and I agree) but to some, that fair share isn’t so fair at all in my opinion. Bernie Sanders, who often trolls Elon on Twitter about his wealth, proposed a 60% tax on billionaires’ stock gains made during the pandemic. This may sound reasonable to those who don’t understand basic finances, but taxing money that isn’t realized or actually made is not fair at all.
If Elon Musk had to pay an additional 60% tax on the paper gains he made, he would have to sell more Tesla shares, which will hurt the company’s place in the stock market by affecting the share price and possibly impacting jobs as well as investors. Add into that mix that there’s nothing there to help when those paper gains are lost. Stock prices go up and down all the time, and this is why you see Elon Musk and Jeff Bezos “fighting” for the title of the world’s wealthiest person.
So, does all of this have an effect on Tesla’s share price? Ross Gerber pointed out that it does.
“It’s 100% Elon, you know. Certainly, the stock was very high priced and priced for perfection, and having the CEO dumping potentially $20 billion in stock puts a lot of supply out on the market and we’re seeing the market react as such, not to mention he’s done it in sort of a sloppy manner — or, you know, a unique manner that is typical of Elon — which creates disruption but it also creates opportunities for long-term shareholders, so we’re kind of happy about it.”
The next question that Ross answered was why he thought there was all of this volatility with the Tesla stock in response to Elon Musk’s Twitter poll as well as in response to some of his other Twitter comments when this was a known outcome in the coming months?
Ross explained that there was a larger, darker issue at hand that both he and Elon are concerned with.
“Nothing with Elon is ever on the surface. There’s a deeper issue that myself and Elon are concerned about which is socialism in this country and the attacking of entrepreneurs and sort of painting everybody with this brush that we’re not paying our fair share.
“I pay a 53% tax rate, so I find it incredibly insulting to have Biden saying I’m not paying my fair share. Now, in Elon’s case, because he doesn’t earn an income, there was a lot of criticism that he wasn’t paying his fair share. So I think he’s showing the effect on the capital markets if there was something like a tax on capital. It would be devastating to the stock market to have founders across every business in America having to sell stock to pay Bernie standards as tax. So, there’s a bigger thing that Elon’s showing is that it costs investors $200 billion for Elon to pay a few billion dollars in taxes.
“It’s an absurd system of taxation that we have today and it’s absurd for the Democrats to be attacking the most successful people in our society.”
Ross added that if they are going to attack rich people like Elon Musk, they should also attack those who inherit the wealth and never have to work or earn their wealth. He pointed out that Elon Musk is the innovator of our time and that he’s frustrated. Ross also emphasized the importance of being comfortable with Elon Musk if you’re going to invest in Tesla.
“If you invest with Elon Musk and you’re not comfortable with who he is, you shouldn’t be an investor. He’s made us a fortune, you know. […] I think it’s volatile stock because you’re investing with Elon. And I call it ‘Elon risk,’ but it creates opportunities for people who can […] see the point of what he’s really trying to say.”
Ross pointed out that when the stock price was at $1,250, it was getting away from him, but now that it’s back down to $1,000, as an investor, he’s happy he gets this opportunity to buy more Tesla stock again because he thinks it’s about to have an amazing run next year. Ross also expanded on what he thinks the catalyst is for Tesla in the coming year.
“The tipping point for EVs is happening, has happened, and we’ve seen it with the Rivian IPO, we’ve seen it with — Lucid’s now delivering cars and how the stock has done. And now with Polestar up three dollars today as people have figured out this is a great electric carmaker here with Polestar GGPI.
“So, when you look at what Tesla’s done is that they’ve advanced sustainable transportation, which is their mission, and now the demand for EVs — even Ford’s demand for the Mach-E is off the charts. When you look at the demand for electric vehicles while oil prices have soared and consumers are just getting gouged and complaining about inflation, which is all at the pump, you have a solution for inflation. It’s an EV. Every Tesla is sold and now we have the rental businesses going in and buying EVs. What I’ve seen from the rental companies I’ve talked to is they’re looking at buying every EV they can.”
Ross explained that there is this confluence of demand that is really a limited supply of vehicles.
“Tesla is the king of this transition. As they ramp production with the Gigafactory in Texas coming online next year, the demand for their vehicles is off the charts and they’re getting bigger and bigger margins as they increase prices.
You can watch the full video here.
Some Additional Thoughts
I kind of have the same fears as Ross and Elon. Don’t get me wrong here, as every societal and political system has good points and bad points. However, the idea of taxing money that isn’t there because it could be there (unrealized gains) is not a good one.
I think that what we truly need is to empower the masses on building their own wealth. It’s okay to pay taxes — we should pay them — but manipulating the masses into thinking that Elon and others don’t pay taxes creates political unrest, which isn’t good for the free market or our economy.
If I was taught about investing in high school, if I had the privilege of learning how to do more than just balance a checkbook, but actually start a business, fund it, and list it on the stock exchange, I may have had a different path in life.
This type of education is needed. Instead, we have popular politicians using other platforms to spread misinformation and in turn weaponize their followers. This is really dark. The demand for Elon to end poverty or world hunger while we give the governments who create the problems and benefit from the problems that lead to poverty and hunger is senseless.
Whether you agree with me or not here, take it from someone who has lived on the streets and woken up at gunpoint before: we need financial literacy for everyone.