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Elon Musk doesn’t earn a salary at Tesla, but the phenomenal operational performance and the exploded share price earned him tens of billions in bonuses a year.
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Musk has figured it out the excellent quarterly figures van Tesla
three stages of his monumental 2018 bonus plan. If Musk immediately cashes in on the options he gets, they could yield roughly 25 billion dollars (23 billion euros) at Thursday’s price.
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Whether he does or not, with the new bonus Musk solidifies his position as the richest person on the planet. With wealth estimated by Forbes at $219 billion, Musk is comfortably ahead of Amazon founder Jeff Bezos ($171 billion) and French luxury emperor Bernard Arnault ($158 billion). That wealth is largely formed by Musk’s 22 percent stake in Tesla and gives him the financial scope for excesses such as a takeover bid on Twitter.
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The essence
- Elon Musk solidifies his position as the richest person on the planet with a new bonus payment to Tesla worth roughly $25 billion.
- With the generous bonus scheme, Tesla hopes to prevent Musk from leaving the company in the short term.
- Such ambitious bonus plans are no exception in Silicon Valley, they actually do realize them.
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On earth
Musk’s current bonus plan dates from 2018. Tesla’s board of directors and shareholders approved a compensation plan to prevent Musk from leaving the electric car manufacturer in the short term. Musk dreams of moving to Mars with his space company SpaceX.
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With a generous bonus plan, Musk could at least be kept on Earth and with Tesla for another ten years, the reasoning went. For investors, Musk’s stay is critical to the interstellar value they place on Tesla: the stock is currently trading at nearly 200 times 2021 earnings.
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With a generous bonus plan, Musk could be kept on Earth and with Tesla for another ten years, the reasoning went.
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The bonus plan for Musk provided for an option package that could give Musk a $55 billion bonus by the end of 2027, provided that Tesla’s market capitalization would have increased tenfold to $650 billion by then, the automaker by then had revenues of at least $50 billion. reaches USD 175 billion and meets a few more profitability criteria.
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That final goal was split into twelve stages: reaching each intermediate goal gives Musk the right to buy 8.4 million Tesla shares at the discounted rate of $70.01 each. The higher Tesla’s price is, the higher the – initially paper – profit.
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The stock market value of 650 billion dollars initially seemed a barely achievable goal, but nothing turned out to be less true. In December 2020, barely two years after the introduction of the bonus plan, the market value already exploded, with a price of more than $ 650 per share.
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redeem
The price has been hovering around $1,000 a share for some time now. That makes Musk’s bonus scheme even more attractive: if he immediately cashes in on the options of each stage, it will yield him more than 8 billion dollars at Thursday’s share price. Those three intermediate goals that were achieved in the first three months of this year would thus yield 25 billion dollars.
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Such bonus packages sound exceptional, but are quite common in Silicon Valley. The unusual thing about Musk is that with Tesla he actually achieves many of the extremely ambitious goals.
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In three years, Musk has achieved eleven of the twelve interim goals at Tesla. Only the turnover target of 175 billion dollars – more than the 127 billion dollars that the largest American car maker General Motors achieved last year – is not immediately in sight: Tesla booked a turnover of almost 54 billion dollars last year. In the explanation of the quarterly figures, Musk said on Wednesday that there are no discussions with the board of directors about a possible new bonus plan, now that eleven of the twelve intermediate steps have already been achieved well before 2028.
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Postpone cheap e-car
In the explanation, it also appeared that Musk has postponed his plans for the production of a cheap electric car from USD 25,000 to the long term. Tesla has further increased the prices of its cars in recent months due to rising prices of raw materials in general and batteries in particular. The cheapest Tesla, Model 3, was initially announced with a starting price of $35,000, but will cost at least $47,000 in the US and Musk is not ruling out further price increases.
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These are necessary because the order book for the American Tesla factories for the rest of the year is almost completely full. In its current pricing, the brand must therefore already take into account the situation on the raw materials market at the end of this year.
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A ride with a robot taxi will be cheaper than a ride on the bus or metro.
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Instead of cheap electric cars, Tesla is now focusing on self-driving taxis, which should roll off the production line from 2024. According to Musk, they have the potential to become “a giant growth engine for the company.” While many companies have already choked on the complexities of autonomous driving, Musk is committed to having self-driving taxis on the road within two years.
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Although the purchase price is high, the fare of such taxis is expected to be low due to the lack of a human driver. “A robot taxi ride will be cheaper than a bus or subway ride,” Musk said on Wednesday.
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