Tesla Inc shares declined 3.0% on Monday as investors prepared for its chief Elon Musk's proposed sale of about a tenth of his holdings in the electric-car maker following his Twitter poll.

Musk, the world's richest person, tweeted on Saturday that he would offload 10% of his stake if users of the social media network approved the proposal.

The Twitter poll asking Musk's followers if he should sell stock garnered more than 3.5 million votes, and 57.9% of the people voted "Yes".

Musk had previously said he would have to exercise a large number of stock options in the next three months, which would create a big tax bill. Selling some of his stock could free up funds to pay the taxes.

"I only have stock, thus the only way for me to pay taxes personally is to sell stock," Musk wrote along with his poll. "I was prepared to accept either outcome."

The electric-vehicle maker's shares were last at $1,185.95 after falling as low as $1,133 earlier in the session. The stock's trading volume was more than 20 million shares by late morning, compared with a 50-day moving average volume of 23 million.

AT STAKE IS $21 BILLION

Market participants expected speculators would try to front-run his selling. Musk owned about 170.5 million shares as of June 30, and a 10% sale would amount to about $21 billion based on Friday's closing price, according to Reuters calculations.

Including stock options, he owns 23% stake in the world's most valuable car company.

In the three months to Nov. 4, company insiders at Tesla sold $259.62 million worth of shares, excluding dispositions of indirectly held shares, according to Refinitiv data.

Musk's poll follows a proposal by U.S. Senate Democrats to tax stocks and other tradeable assets of billionaires to help finance President Joe Biden's social spending plan and fill a loophole that allowed the rich to indefinitely defer capital gains taxes.

"The last thing you do when offloading a massive exposure is to reveal your hand," said Chris Weston, head of research at broker Pepperstone in Melbourne.

"The buyers tend to step away when you have an overhang like this, but this is no ordinary story and is Musk's way of getting back at the proposal to tax the elite with gains on unrealized profits."

Last month, Tesla breached a trillion dollars in market capitalization, becoming the fifth U.S. company to join a club which includes Apple, Microsoft, Amazon and Alphabet.

"The dip is not going to last too long, because Tesla has had such a phenomenal record of bouncing back from these sort of sell-offs," said David Madden, markets analyst at Equiti Capital in London.

REGULATORY SCRUTINY

Musk's tweet once again raises questions about whether he is in compliance with a 2018 settlement he agreed with the U.S. Securities and Exchange Commission to have material tweets about the company vetted by a lawyer. The SEC, which declined to comment, found Musk violated that agreement in 2019, leading the agency to tighten up the settlement.

The billionaire, known for his Twitter banter and lively interactions with followers, was fined $20 million by the U.S. SEC for tweeting in 2018 that he was considering taking Tesla private at $420 a share and had secured funding. The SEC also asked him to step down as chairman.

With his almost cult-like following, Musk has amassed considerable power to move Tesla's stock with his comments, but murky rules make it difficult for regulators to rein him in, Reuters reported in May.

(Reporting by Vidya Ranganathan in Singapore and Subrat Patnaik, Sruthi Shankar, Tanvi Mehta, Anisha Sircar in Bengaluru; additional reporting by Michelle Price and Chris Prentice in Washington and Caroline Valetkevitch in New York, Noel Randewich in San Francisco; Editing by Shounak Dasgupta, Arun Koyyur and Nick Zieminski)