New “replacement” payment package Tesla For basic reasons, on August 3, Elon Musk was unveiled on August 3. It guarantees something that was opened in previous versions – if Tesla’s stock is huge round trip back and forth the price is huge, they gave Musk that huge slug price, shareholders can only dilute the director’s huge size. Musk still holds billions of dollars worth of shares.
Recall that in 2024, in response to the lawsuits of EV-Maker shareholders, the Delaware court voided the famous Giga Grant approved in January 2018. Musk and the company appealed the ruling, which is being appealed. Tesla’s board of directors stepped in to ensure that if Tesla side loses, the CEO will get something similar to the number he sacrificed. But this time, they did not attach a series of wise conditions for the first time.
Naturally, the deal was only lost in Musk and Tesla on the appeal. If that happens, in the new iteration, he will receive a restricted stock grant, earning 96 million shares at a $23.34 exercise price, the equivalent of the number he received when he received the huge Trove in early 2018. Tesla’s current price is about $309, and these stocks will be worth more than $27 billion. Here are the restrictions: Stocks are on the second anniversary of the grant or early August 2027, but only if Musk serves as CEO or head of product development or operations throughout the period. In addition, he cannot sell any vested shares until five years from the date of the award or August 3, 2030.
The director’s goal is clearly to keep Musk’s head in order to enhance the opportunity he will provide a lot of time on the promise of coming (rather than commercial robots, autonomous driving software and humanoid robots). But for Tesla holders, the structure of the plan comes and goes with the promise of gauze, using cliches often found in CEO Comp Plans, “align” Musk’s fate is closer than the first one
The 2018 plan rewards Musk for huge valuation gains with lofty remarks
The landmark original guarantee Musk Ladder rewards Tesla stocks with an additional bonus of $50 billion per reward. The starting point was US$100 billion, which was a multiple of its market value at that time. If Musk hit a high of $650 billion, a figure that seemed incredible at the time, he would have accumulated 12% of Tesla’s stock. The framework is similar to the process of opening a safe; getting a new 1% requires two “keys”, first hitting a valuation bogey, secondly, achieving 12 of 18 total revenues and EBITDA’s total goals. EBITDA’s top target is $14 billion, with the highest sales figure of $175 billion.
Within three and a half years in mid-2021, Musk rang the bell. He first exceeded the $60 billion market cap, then scored all EBITDA benchmarks and supplemented that achievement by reaching $75 billion in intermediate sales to meet the needs of 12 operating metrics. Therefore, Musk gained a complete surprise.
The big drawback of this concept: Musk has been making a huge vow to new products that stunning investors. This helped to get the stock out to the sky, helping him achieve the valuation part. Income and EBITDA requirements are relatively vulnerable. Therefore, exaggerating the combination of stock price inflation without having to provide excellent basic profitability wins a day’s reward.
To be fair, when Musk receives an average 1% stock grant, Tesla’s cap will still be nearly $1 trillion, and its level is still three times that of his, up from 50% of his last piece. Question: In the long run, it is impossible to know the true value of Tesla. And if it turns out to be primarily a metal-bending car company, or if it needs to build Musk’s visionary business and fierce competition, it needs to be profitable, Tesla’s value could be restored to something like when Musk captured the then-seemingly impossible package in early 2018, when Tesla traded $23.34 when it traded.
According to the new deal, if Tesla’s stock tanks last for a long time, Musk will not be paid
The initial plan had a major weakness. Musk has acquired 12% of his stock in advance. So even if the stock has been down to its initial hit price of $23.34, bringing Tesla’s market cap to $75 billion, he still owns $9 billion in stake (12% of $75 billion). Shareholders will endure the large dilution and get a zipper for this.
But the new plan ensures that it won’t happen. Is it absolutely impossible for Tesla to fall? not at all. Just look at its current fundamentals. It only makes sense if Tesla meets its prescribed operational goals to trigger grants and rapidly increase revenue and profits from there. In other words, fundamentals must grow into valuations. Musk is essentially paid for the great things that are coming.
That didn’t happen. In the first two quarters of this year, Tesla’s sales ran at $84 billion a year beside a $75 billion bogey a few years ago. In the same six months, its EBITDA was trapped at $12 billion a year, down from $14 billion in release spending.
I recently wrote an article about “Musk Magic Advanced” and the article calculated Tesla based on the value of current products, and the additional value of Musk’s visionary plea reward– That’s a premium. To get the core of today’s electric cars and batteries, repeatable income numbers, I eliminated accounting gains or losses from their bitcoin holdings and minus sales of regulatory credits that could have died due to Trump’s recent fines on automakers that stopped buying them.
The “hardcore” figure was $3.3 billion in the past four quarters. Imagine Musk improving that figure at 8% per year, so net income in 2030 reached $5.4 billion, which is Musk selling stocks for free under the new plan (if it happens). We also assume that since this is a low-growth manufacturer, Tesla guarantees PE much higher than the automotive industry average of 14 years old. Then, it will be five years worth $75 billion.
This result will bring the stock closer to Musk’s strike price of $23.34. His biggest grant will be worthless, and in the case of the old grant, he still owns $9 billion worth of stock. Even if Tesla’s stock price falls to around $50 with its upper limit of about $150 billion, Musk’s revenue will be much less, about $2.5 billion. Yes, it is a good thing that Tesla’s board of directors forces Musk to wait a long time before getting paid. Five years from now on, we will be able to see the true value of all these commitments. If they are exhaust in the tailpipe, shareholders will suffer huge time. But Elon Musk will suffer with them.
