Elon Musk Will Have To Wait To Cash In On Tesla, If He Ever Does
An interesting article from Jalopnik that takes a look at how much Elon Musk can make from selling his stocks of Tesla from his compensation package.
jalopnik.com
Elon Musk’s compensation package at Tesla is based entirely on various benchmarks tied to revenue and the company’s stock price. Put in place in 2018, Musk in theory could earn up to $55 billion in the form of stock options by 2028. Today, Tesla said the first tranche of those stock options has vested.
That tranche is, on paper, worth about $775 million, according to CNBC’s math, based on Tesla’s current stock price of around $800.
That sounds like a lot of money—and it is–but according to the way the compensation is structured, Musk will have to wait to cash out, if he ever does. Specifically, Musk will have to wait five years after exercising the option to sell the shares and cash in. That means that the options aren’t worth anything more than what Tesla’s stock price will be five years after Musk exercises them, not what the stock price is now.
Here is the relevant sections of the SEC filing:
That is a bet for Musk, in other words, that Tesla’s stock price in 2025 (if he exercises the option this year) will be above $350, which honestly feels like a pretty risky proposition. Because as much as there is an upside to compensation structured this way there is a downside as well, since if Musk exercises and in five years Tesla stock is worth, say $100, Musk will be out the difference between that and $350 (about $425 million if I’m doing my math right, since buying 1.7 million shares at $350/share would cost around $595 million, and 1.7 million shares are worth $170 million at a stock price of $100).
That is also the reason why Musk’s defenders say he deserves a pay package like this, because it’s structured to have him put real skin in the game.
You can read the whole SEC filing here.
Elon Musk Will Have To Wait To Cash In On Tesla, If He Ever Does
Elon Musk’s compensation package at Tesla is based entirely on various benchmarks tied to revenue and the company’s stock price. Put in place in 2018, Musk in theory could earn up to $55 billion in the form of stock options by 2028. Today, Tesla said the first tranche of those stock options has...
jalopnik.com
Elon Musk’s compensation package at Tesla is based entirely on various benchmarks tied to revenue and the company’s stock price. Put in place in 2018, Musk in theory could earn up to $55 billion in the form of stock options by 2028. Today, Tesla said the first tranche of those stock options has vested.
That tranche is, on paper, worth about $775 million, according to CNBC’s math, based on Tesla’s current stock price of around $800.
That sounds like a lot of money—and it is–but according to the way the compensation is structured, Musk will have to wait to cash out, if he ever does. Specifically, Musk will have to wait five years after exercising the option to sell the shares and cash in. That means that the options aren’t worth anything more than what Tesla’s stock price will be five years after Musk exercises them, not what the stock price is now.
Here is the relevant sections of the SEC filing:
It wasn’t clear Thursday if Musk had exercised, but he now has the right (per CNBC) to buy 1.7 million shares of Tesla at a price of $350.02 per share. Musk’s potential profit—and where that $775 million figure comes from, based on Tesla’s current stock price—is the difference between the $350.02 price and Tesla’s stock price at the time he sells.
That is a bet for Musk, in other words, that Tesla’s stock price in 2025 (if he exercises the option this year) will be above $350, which honestly feels like a pretty risky proposition. Because as much as there is an upside to compensation structured this way there is a downside as well, since if Musk exercises and in five years Tesla stock is worth, say $100, Musk will be out the difference between that and $350 (about $425 million if I’m doing my math right, since buying 1.7 million shares at $350/share would cost around $595 million, and 1.7 million shares are worth $170 million at a stock price of $100).
That is also the reason why Musk’s defenders say he deserves a pay package like this, because it’s structured to have him put real skin in the game.
You can read the whole SEC filing here.
