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Musk, Bezos lead the charge of US billionaires selling shares

Mark Zuckerberg sold Meta Platforms stock almost every weekday of this year.

The founders of Google began to unload shares in May, which is also when two of the three Airbnb co-founders started diversifying their stakes. 

The transactions are part of a surge of selling by the very richest Americans. They unloaded US$42.9 billion in stock through the start of December, more than double the US$20.2 billion they sold in all of 2020, according to an analysis of transactions by US billionaires on the Bloomberg Billionaires Index, a daily ranking of the world’s richest 500 people.

The super-wealthy often hold onto shares in the companies that made their fortunes, because realising gains triggers a tax bill. But many rich Americans are deciding to unload shares now, while stock valuations are at records and before their taxes potentially rise at the start of 2022.

“A lot of our clients are selling,” said Elizabeth Sevilla, a partner at Seiler LLP, an advisory firm based in the San Francisco Bay area. Founders and venture capitalists are deciding they want to diversify concentrated positions, or “they’re looking at the market and saying, ‘We’re at the top of the market.’”

Plus, biting the tax bullet in 2021 may mean avoiding rate hikes in future years, she said.

Several of the world’s richest people have been selling core holdings after years of hibernation, including Sergey Brin and Larry Page, the reclusive co-founders of Google. So far this year, Page has sold around US$1.8 billion in stock of Google parent Alphabet and Brin around US$1.7 billion. It was the first time either had sold shares since 2017. 

“UNREALISED GAINS”

Elon Musk, the world’s richest person, has unloaded about US$12.7 billion in Tesla shares this year, the first time he’s sold stock since 2016. The selling streak was unleashed after the billionaire, who has a personal fortune of US$253.6 billion, asked in a Twitter poll last month whether he should divest 10 per cent of his shares in the electric-auto maker.

“Much is made lately of unrealised gains being a means of tax avoidance,” he tweeted, promising to abide by the poll’s results.

Michael Dell, founder and chief executive officer of Dell Technologies, hadn’t sold shares of his company in at least two years, or since it returned to public markets in 2018. So far this year, he’s disposed of about US$500 million.

Whether avoiding taxes was their goal or not, selling in 2021 could help these billionaires save billions of dollars. Even as Musk framed his sales as tied to the outcome of a Twitter poll, some of the sale was pre-planned and displayed canny awareness of tax liabilities, both at the federal and state level.

While Democrats have dropped several ideas to hike taxes on the top 0.1 per cent to pay for President Joe Biden’s economic agenda, the bill that passed the House of Representatives last month included a millionaire’s surtax, a 5 per cent levy on incomes over US$10 million and an additional 3 per cent tax on those above US$25 million.

The surtax, which is projected by the Joint Committee on Taxation to raise US$228 billion over the next decade, applies to a broader definition of income, including capital gains, making it harder to avoid through deductions. It wouldn’t go into effect until 2022, however, giving the super-wealthy an opportunity to sell now and over the next couple weeks, saving as much as 8 per cent on taxes.

Easy Decision

“It’s not an exodus from the market,” Seiler’s Sevilla said. Instead, planners are sitting down with wealthy tech clients and gauging the impact of the surtax and other tax proposals, then calculating how much investments would need to rise to justify holding onto them. “If they know they cannot exceed that, the decision is easy,” Sevilla said.

The 167 Americans on the Bloomberg index are worth about US$3.6 trillion, up 47 per cent since the beginning of last year. Their wealth gains have been driven by a rapid run-up in stock valuations during that period, with the S&P 500 Index up about 45 per cent and the tech-heavy Nasdaq Composite Index gaining 75 per cent.

The top billionaires’ stock sales have soared faster than their wealth. In 2019, the richest Americans sold just US$6.6 billion of stock, a similar amount as in previous years. 

The selling really picked up in 2020, as Democratic candidates were on the campaign trail proposing to raise rates on the rich. Advisers spent much of the year warning of higher taxes as early as 2021 if Democrats took over.

Meanwhile, stock valuations were surging last year, particularly in tech stocks benefiting from trends unleashed by the pandemic.

Nvidia co-founder and CEO Jensen Huang sold shares in the chipmaker in July 2020 as it was hitting new highs, his first sales in almost three years. The stock price has nearly tripled since then, and Huang’s sales have accelerated as well. He’s sold US$426 million so far this year, on top of US$168 million in 2020.

Another factor driving sales is a wave of initial public offerings, which made it possible for founders of successful startups to diversify their fortunes for the first time.

Two of Airbnb Inc.’s three cofounders – Joseph Gebbia and Nathan Blecharczyk – have together sold more than US$1 billion worth of stock since the vacation-rental company went public in December of last year. Another co-founder, CEO Brian Chesky, hasn’t sold any shares this year, according to filings. 

Even as US billionaires sell more, their stock purchases are stagnant. Americans on the Bloomberg index bought US$543 million of shares on the open market through Dec 3, an increase from last year but less than half their purchases in 2018. The analysis doesn’t take into account other ways billionaires acquire shares, such as stock grants or option awards that are part of compensation packages.

PERSONAL REASONS

The richest Americans could have a variety of personal reasons for selling now, including funding charitable endeavors.
Jeff Bezos, the world’s second-richest person, has sold more than US$9 billion in Amazon.com this year, money that he could use to deliver on recent grants and pledges to fight climate change through his Bezos Earth Fund.

Zuckerberg is liquidating more Meta stock – formerly known as Facebook – than he has in years, largely to send to his Chan-Zuckerberg Initiative. He’s sold US$4.5 billion this year, nearly eight times more than he sold in 2020. Six years ago he and his wife Priscilla Chan pledged to give 99 per cent of their wealth to charity during their lifetimes.

Jack Dorsey, the founder of Twitter, has sold nearly US$500 million in stock this year of another company he founded, Block. Last year he announced a promise to donate a large stake in the company, formerly known as Square, to COVID-19 relief. (The billionaire has mostly not touched his Twitter shares, which comprises less than 10 per cent of his US$10.4 billion net worth, according to the Bloomberg index.) 

It’s taken all year for Biden and congressional Democrats to coalesce around a tax bill. Along the way, Biden proposed a variety of other provisions targeting the wealthy, including an almost-doubling of the capital-gains tax rate for high earners. Most of those ideas have been dropped, and new proposals – like a so-called “billionaire’s tax” on unrealised capital gains of publicly traded assets – also didn’t make it into the House-passed bill.

“It’s been a bit of a roller coaster,” said Pratik Patel, managing director of family wealth strategies at BMO Family Office.
Even now, it’s not clear what the final changes might look like. Negotiations may slip into 2022, assuming Democrats can pass anything at all. 

“Everyone feels like taxes are going up,” Patel said. But “there’s still uncertainty. A lot of our clients are in a wait-and-see approach.”
 


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