As Nadella, Musk, And Bezos Sell To Pay Less Tax, Buy Microsoft Stock

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The NASDAQ Composite has lost 7% of its value as it peaked at 16,212. This fall has been accompanied by major stock sales by Microsoft CEO Satya Nadella, Tesla CEO Elon Musk and Amazon executive chairman Jeff Bezos.

Is this a sign that we’re in for a major tech stock recession — on the lines of a 77% drop on the NASDAQ between October 1999 and July 2002 (when it was down at 1,160)?

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Or is it a buying opportunity due to the CEO dumping his shares in advance of higher tax rates on his capital gains?

I don’t know the answer, but I’m holding onto my stocks as I did during the NASDAQ crash and all the stock markets have crashed since then.

The reason is simple – when stocks are sold, investors always conclude that, compared to options, stocks are the best place to put your money over the long term. Since I can’t pick the tops or bottoms of the market, I’m going through a painful downtrend.

If forced to choose – I support the scenario that investors will start 2022 with the idea that stocks are a better place for their money than cash or bonds. I don’t see this as the start of a two-year decline in the value of tech stocks.

Compared to Microsoft, Amazon, and Tesla, I’d bet most comfortably on Microsoft.

(I have no financial interest in the said securities).

Some tax rates will increase in 2022

Washington state has passed a new 7% capital gains tax that goes into effect in early 2022. The new tax imposes a 7% tax on capital gains over $250,000. Seattle Times,

What’s more, federal taxes may also increase for higher income earners. As CNBC The report said the House proposed a new additional tax of 5% on income over $10 million and 8% on income over $25 million.

How Tech CEOs Are Responding to Higher Taxes on Their Stock Profits

Corporate insiders sold a record amount of stock in 2021 and the leading seller is technology CEOs.

As reported by CNBC, a combination of higher stock prices and tax hikes prompted corporate insiders to sell $69 billion in stock in 2021. As of November 29, the aggregate represented a 30% increase from 2020 and a 79% jump over the 10-year average.

Microsoft CEO Satya Nadella dumped more than half of his shares last month in a $285 million transaction that CNBC estimates saved him up to $20 million in state taxes.

A Microsoft spokesperson said that Nadella sold the shares “for personal financial planning and diversification reasons,” adding that Nadella, who is also the company’s chairman, “is committed to the company’s continued success and that his holdings have significantly exceeded the holding requirements set out.” more. Microsoft Board of Directors,” according to Seattle Times,

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Founder Jeff Bezos sold nearly $3.3 billion in Amazon shares in November. By selling before January, Bezos could save up to $700 million in Washington state taxes, CNBC noted.

So far in 2021, he has sold a total of $9.97 billion in Amazon stock. This, CNBC said, is about the same level of sales in 2020 — but four times higher than its sales in 2019 and “far more than its $1 billion per year sales in prior years.”

Meanwhile, Tesla
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CEO Elon Musk has sold over $10 billion in Tesla stock Luck, with the intention of selling its 10% stake. They aim to use the proceeds of the sale to pay taxes “amidst continued pressure from US lawmakers like Sen. Bernie Sanders that billionaires ‘pay their fair share’.”

The shares of these three companies are well below their highs. Microsoft shares are down 8% from their November 22 peak; Amazon trades 10% below its high while Tesla is down 19% from its all-time high.

Rapid growth prospects look best for Microsoft

Of the three companies, Microsoft appears to be the one with the most predictable and rapid market share growth. Sporting a $2.53 trillion market capitalization, Microsoft stock has risen more than 50% in 2021, up nearly 780% since he was appointed CEO.

In the third quarter, Microsoft’s revenue rose 22% to $45.32 billion — nearly $1.3 billion ahead of analysts’ expectations. Microsoft forecast $50.6 billion in revenue for the current quarter — according to CNBC, about $1.7 billion more than the analyst consensus, and 17% higher than a year ago.

Tesla has done well — but its stock market has underperformed. Musk receives no salary and is paid only stock-based compensation. To pay his bills, Musk is borrowing money — pledging his shares as collateral.

Musk controls about 22% of Tesla’s outstanding shares given in the 2012 stimulus package. Since then, Tesla’s market capitalization has grown from $3.2 billion to over $1 trillion. This year, Tesla stock is up nearly 49%.

The strike price on his options is $6.24 – almost 99% less than its current price. Unless he exercises the options by the following August, they expire. So he’s in the middle of using the proceeds to pay his taxes and selling them, Fortune noted.

Tesla beat expectations for its third quarter, beating growth. According to CNBC, Tesla reported $13.76 billion in revenue — $150 million above Refinitiv’s expectations and about 57% more than a year ago. Net income of $1.62 billion, up 388% from the $331 million earned in Q3 2020.

Amazon is really slowing down. Its shares are up only 6.4% so far in 2021. 28, Amazon fell short of investor expectations and forecast a worse fourth quarter. According to CNBC, third-quarter revenue rose 15% to $110.8 billion — nearly $810 million less than analysts surveyed by Refinitiv while earnings per share of $6.12 were 31% below expectations.

Amazon forecast fourth-quarter revenue growth below analysts’ estimates. Amazon forecasts revenue growth in the range of between 4% and 12%, with its midpoint — $135 billion — $7.2 billion below analysts’ expectations for 13.2% growth.

Microsoft looks to me like the safest bet of the bunch in that Tesla continues to fall at least until Musk makes sales to pay his taxes and puts Amazon stock on hold until it’s very Couldn’t post fast revenue growth.

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