By on March 21, 2018

elon musk

Tesla investors approved an incentive package on Wednesday that could ultimately net CEO Elon Musk around $56 billion. There is a catch, however. He has to elevate the company’s share price to almost comically high levels. Having already covered the deal, we noted some opposition from analysts, but not shareholders — all of whom seem overwhelmingly happy to oblige Musk if he improves their wealth, as well.

Investment advisor Glass Lewis & Co. said offering the CEO an additional 12 percent in stock options (currently valued at around $2.6 billion) was unnecessary since he is already a major shareholder and the move could dilute value for other investors. But most agreed Musk was too important to risk losing and agreed to the package to keep him in charge of the company, despite Musk stating this was his intent all along.

Whether or not Musk sees the big $55.8-billion payday is up to him and chance, however. He doesn’t reap the rewards of the package until Tesla nearly doubles its present market cap. After it hits the $100 billion mark, he becomes eligible for the stock options — which are split into 12 tranches separated by $50 billion. If Musk manages to elevate the market cap to the astronomical goal of $650 billion, he gets the whole hog. If he doesn’t break the initial barrier of $100 billion, he gets nothing.

According to Reuters, shareholders approved the compensation package on Wednesday during a special shareholder’s meeting in Fremont, California. As the final tally is not yet official, the source did not specify the number of votes for or against. But Tesla should make an announcement soon.

Is it a smart plan? We’re not day traders or market analysts, so we cannot say anything with supreme authority. But Musk has certainly been good for the company’s share price thus far. Under his leadership, its valuation has increased tenfold since 2013 and investors hope he can do the same over the next ten years. Still, a market cap of $650 billion would make Tesla one of the highest-valued companies in existence and might be unrealistic.

Ideally, Musk’s reward would be linked to a handful of reasonable production goals, too. Tesla is still having trouble meeting Model 3 volume targets and, while the automaker promises production will be on track before the end of the month, it’d be nice to have some assurance that it was a priority. Tesla is an innovative organization and great at grabbing attention, but its productivity (or lack thereof) will eventually influence its share price. The Model 3 has to nudge the company into profitability if Tesla wants 10 years of unbridled gains on Wall Street.

Then again, there are plenty of tech companies with ludicrously high stock valuations that only occasionally operate in the black (like Amazon) or hardly ever left the red (like Twitter). Furthermore, while overall profitability remains important for automakers, it isn’t like the old days. Making money isn’t enough; there’s also an increasing emphasis on bolstering a company’s share price.

If you don’t believe us, just ask Elon Musk or Mark Fields. The former runs a currently unprofitable business with a perpetually rising stock valuation while the latter oversaw a profitable automaker for three years and was fired because investors weren’t happy with the company’s declining share price.

[Image: OnInnovation/Flickr (CC BY-ND 2.0)]

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19 Comments on “Tesla Shareholders Confirm Musk’s Money...”


  • avatar
    Sub-600

    That German manufacturing equipment fell off a truck in Luxembourg the other day. They should have it repacked and on it’s way to Nevada by the end of the week. Those Model 3s will be flying off the assembly line in no time.

  • avatar
    CaddyDaddy

    “Laissez le bon temps rouler.” Let the Good Times Roll!

    Market-Cap Benchmarks that’s how we measure success. Profit, what the hell is that??

    We make more money in fees issuing debt in Tesla backed bonds. We then package the debt and sell to public pension funds fleeced from the tax payers. Everyone wins on our side at least.

    When it all goes bankrupt, the taxpayer will fund the public pension shortfalls and will be in the Caymans. Hell Yeah!

    • 0 avatar
      highdesertcat

      As long as Elon Musk can show some semblance of success in any of his ventures, he’ll be OK.

      The biggest thing he has going for himself is Space X. And with each successful launch and recovery it is a resounding kaaa-cccchiiiiiing!

      Tesla-cars is a nice diversion for the very well-to-do niche, as are the autonomous trucks and the hyperloop.

      The real money is in Space Cargo Delivery.

  • avatar
    Asdf

    If Elon Musk, even after all this time, is still unable to turn Tesla into a worthy automaker by launching EVs at least as good as a petrol- or diesel-powered car with regards to range, charging time and price, then he really should call it quits and close down the whole company, whose embarrassing range of prematurely launched vehicles currently only serves as concrete evidence of the non-viability of EVs (in spite of what the brainwashed EV fanbois at TTAC may claim).

    • 0 avatar
      SCE to AUX

      How do you reconcile the fact that TSLA shareholders and an ever-growing customer base don’t agree with you?

      Maybe somebody out there doesn’t like Jeep’s 7-bar grille, or their legendary unreliability. Doesn’t seem to matter where it counts.

    • 0 avatar
      mcs

      @asdf: How did I put 60k miles on a non-viable car in 3 years? Exactly how did my car brainwash me by taking me 60k miles without any problems? Okay, the instant torque and the smoothness probably did it.

      No one is forcing people to buy Teslas or other EVs. (except maybe Europe or China)

      This morning, I went 20+ from my home to my office in Boston in 36-degree weather. Made it to the parking garage with 80% battery capacity. Plugged it into a 120v outlet in the garage with the little 14 amp charger that came with the car. I put it a 5 hour day and when I got back to the car, it was charged to 100% reading 104 miles range. I have no idea how long it took to charge.

      How is that unviable? It does its job and neither the range limitations or charging times don’t get in the way. Just the opposite. I don’t have to take time for oil changes or waste time standing outside in the cold pumping gas into it.

      It’s a choice. I choose to get around with an EV and aircraft. It works for me, but maybe not for you.

    • 0 avatar
      brandloyalty

      Asdf, your post was a premature launch.

  • avatar
    SCE to AUX

    Being deemed a franchise player is a two-edged sword:

    http://www.post-gazette.com/sports/steelers/2018/03/06/leveon-bell-franchise-tag-steelers-salary-cap-free-agents/stories/201803060132

  • avatar
    peeryog

    Well, he does have lovely teeth.

  • avatar
    sooperedd

    Tesla shareholders = “Thank you sir, may I have another.”

  • avatar
    carguy67

    Say what you want about Musk–I’m neither fanboy nor hater–he’s delivering products. Zuckerberg, et al, are selling us as ‘the product.’

    • 0 avatar
      abhi

      Agreed … I will be honest I may have not been the biggest fan of the Tesla (space x a diff story though). What has recently changed was a friend’s recent purchase a model s while I think they may have a ways to go on certain aspects of fit and finish it was an impressive product.

      I think their biggest competitor is themselves though; when you’ve made certain promises for capital there has to be a delivery aspect to that and that is where its all going to lie is the execution. I do think it can be done there is going to be a cost to getting it done though.

  • avatar
    turf3

    Now maybe he can afford a razor.

  • avatar
    stuki

    Simpletonian hero worship is a common feature of all late stage financialized dystopias. As the ratio of money chasing paper to money chasing product get ever more lopsided, productivity related metrics, along with ability and competence in general, largely ceases to matter. To be replaced by familiar, well hyped faces. Which those whose sole qualification is closeness to the money printers, have been told are “good investments.”

    Musk may well be a genius at auto making. Or he may be a dolt. Most likely he is, like most people, somewhere in the middle. None of which matters one whit. Like the Kardashians, he is famous for being famous. Only with a group of people who get their entertainment from buying and comparing paper, rather than booty and petty intrigues.

  • avatar
    Ultraviolet Thunder

    For someone who has taken $500 million in taxpayer money and has repeatedly promised the moon (or is that Mars) and delivered virtually nothing of note, this guy should be making $1 until he gets his company to produce.

    Right now his products are shoddy, expensive, and you can’t buy what he promises.

    • 0 avatar
      SCE to AUX

      Please explain the $500 million he has taken.

      If you’re referring to the $450 million DOE loan, it was paid back early several years ago.

      As for Tesla’s Model S, it is outselling all others in its class. But I’ll grant that the Model 3 is hard to come by.

    • 0 avatar
      highdesertcat

      UT, money is fungible. Once he got it there’s no tellin’ where and how it was used, like maybe on other projects not involving EVs.

      Maybe all that cash was used to bolster more research on reusable rocketry.

      To me it would seem that the US gov’t is more interested in what Space X can do for them than what EVs can do to drain the Treasury at $7500 a pop.


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