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I doubt it. He's worth $38.5 billion; $26b of that is in Tesla. He can shave off hundreds of millions of dollars from that any day of the week - if he cared to

I doubt it. He's worth $38.5 billion; $26b of that is in Tesla. He can shave off hundreds of millions of dollars from that any day of the week - if he cared to do so. The compensation package is relatively small compared to his existing wealth already contained in Tesla. Wanting the company to succeed is what most likely motivates him, not the compensation package (which is aligned with his existing interests, even if you think he's primarily in it for the $26b (little evidence to support that, he's personally loaded with debt because he refuses to sell, that's called being all in; any good financial advisor would call it dangerous concentration and a poor choice to take on debt instead of selling)).

jonny_eh 7y ago
Then why have a compensation package like that if it's just a rounding error for him? Maybe people like him can't stand to lose out on a dollar, especially when they believe they deserve it.
- toomuchtodo 7y ago
  Going to Mars isn't cheap.
gamblor956 7y ago
Musk is worth $38.5 billion based on his current Tesla stock holdings at their current valuation. If he hits the trigger in his compensation package, he gets even more Tesla stock which will vastly increase his net worth on paper Also, Musk is loaded with debt because he leveraged his stock holdings to live a very lavish lifestyle, including multiple residential properties, vehicles, and very expensive dining choices.
- ryanwaggoner 7y ago
  There are no very expensive vehicles or dining choices when you’re worth tens of billions. It’s literally meaningless, like it would be for me if all my meals for a year cost me 1% of a penny.
  - marnett 7y ago
    What about a catered party for 500 with staff and celebrity chef? The wealthy can throw lavish events that are not necessarily a drop in the bucket, especially if common.
    - tgsovlerkhgsel 7y ago
      Let's say this thing costs $200 per person, so $100k per party. Let's say he does this every day (or throws a 3.5x as lavish party twice a week), that's $36.5M per year. He can do this for 10 years and it will still literally be a rounding error in his wealth.
      - gamblor956 7y ago
        Of his current wealth on paper, yes. But almost all of Elon's wealth is in the form of his stock holdings, and stocks fluctuate in price. Moreover, his cash is almost all leveraged from his stock, and if the price collapses again, he could be wiped out by the margin call.
        codeisawesome 7y ago
        I want to read a book (or a few!) full of these dynamics of wealth - what it means to be paper wealthy, what leveraging that can do for your lifestyle, and why people live in fear of the margin call. Can I please ask you for any recommendations?
        texasbigdata 7y ago
        Or....he structured it as "let me borrow 60% of X, and here as some shares worth X as collateral.". Aka synthetically manufactured selling shared without actually doing it in order to fund his lifestyle. Depending on the advance rate (the 60% in this case), someone will do that deal. To take it to the absurd. If Elon wanted to fund his $35M daily party habit in the comment above, and he said to a bank "here is 3 billion in stock as pledged collateral which you can sell when the value goes to $500M but there's no recourse. Cool? Cool. " You would do that deal. So the margin call concept does not seem realistic.
- microtherion 7y ago
  Very expensive dining choices? How much truffled avocado toast do you have to eat to make a dent in his kind of wealth?
  - madeofpalk 7y ago
    Flying premium cocaine in from wherever would be expensive, I guess. But in all seriousness, lifestyle expenses scale with your income.
    - nullc 7y ago
      > But in all seriousness, lifestyle expenses scale with your income. If you're foolish.
  - dantheman 7y ago
    You do know he almost went bankrupt awhile back - starting companies is incredibly expensive and his wealth is in the ownership of the companies - not just an investment portfolio.
- zaroth 7y ago
  > If he hits the trigger in his compensation package, he gets even more Tesla stock which will vastly increase his net worth on paper. Elon currently holds ~34 million shares of Tesla. If TSLA market cap hits a 6-month running average of $100 billion his first of 12 tranches of stock options vest, which is 1.69 million shares at $350 per share. Musk will spend $591 million to buy the 1.69 million shares, which on the open market are worth $1.352 billion. What actually happens is he executes the options and immediately sells shares to cover the execution cost, for a net gain of ~950k shares. He then also has to sell shares to cover the taxes due at the time of exercise, which we'll under-estimate at 20% of the profit ($450 * 1.69 million * 20%) = $152 million. That's another 190,000 shares gone. Now we're down to a net gain of 760k shares on the 1.69 million. So when the tranche vests, he will own ~2.2% more TSLA stock than he did the day prior. Best case. If tax rate is higher, which it is because California, it's probably less than a 2% bump to Elon's overall TSLA holding. EDIT: Oh, one other thing. Any shares which are not sold to cover the strike price and the taxes due I believe must be held by Elon at least 10 years before he can sell any. So the primary effects of hitting a tranche are 1) it generates $591 million of cash flow for Tesla, a nice equity raise. 2) it generates at least $150 million in tax revenue for We The People.
  - gamblor956 7y ago
    2.2% more stock is a huge amount of stock when you're already talking about the company's biggest individual shareholder. That aside, a HNWI would never liquidate stock to exercise options or to pay taxes, since each action triggers a realization event and an associated tax liability. They would take out loans secured by the stock, since that doesn't result in a huge tax bill. So in the real world, Musk would use the $591 million cash he already has in the bank (having previously taken out loans against his Tesla shares) and use that to exercise his options. He would then use some of the remaining few billion in his bank account (again, from the loans secured by his Tesla shares) to pay any state and federal taxes owed. The only time HNWIs deliberately trigger taxable events is when they have losses or credits to absorb the resultant tax liability.
    - zaroth 7y ago
      I believe that the taxable event happens when the option is exercised, whether any shares are sold or not. Actually selling the shares doesn’t change the amount of tax due. I don’t know that he will sell shares to cover the strike price or the taxes, but I can say certainly it is explicitly permitted for him to sell shares only for that reason. Otherwise they must be held for at least (EDIT) 5 years post exercise. He can simply hold the vested option but not exercise it. All options expire by 2028, and all vested options must be exercised within 1 year if he loses the CEO title. He does not gain any shareholder rights from those shares until the options are exercised. So this delays the payment of the strike price and taxes, but does not alter the basic math. In short, a 2% bump in his equity position is below the noise floor of the daily price change of the actual shares. Frankly it almost makes you wonder what’s the point. Once you own double digit percentages of an asset that could appreciate more than 10x it’s more important to focus on the size of the pie than the size of your slice. The vast change in Elon’s wealth was through achieving an IPO and getting the share value upwards of $800. An extra few million shares to him is the same as the difference between selling on a Monday or a Tuesday.
- BurningFrog 7y ago
  This might make sense for $38.5 million. For $38.5 billion, no lifestyle choice in the world has any impact on that money.
  - deleted 7y ago
    [deleted]
  - gamblor956 7y ago
    Elon Musk does not have $38.5 billion in unencumbered cash. Almost all of his cash is from loans taken against his Tesla stock. If Tesla stock loses value, Elon Musk faces the risk of a margin call. In fact, this almost happened last year and the year before. It's one of the reasons that he wastes so much time going after shorts; it's not for fun--it's a matter of personal financial survival.
madeofpalk 7y ago
People don’t get and stay rich by not earning money.
- NotSammyHagar 7y ago
  Unless you say inherited a giant amount from your family, which can cover a lifetime amount of idiocy. Hmm.
wfbarks 7y ago
Bonus probably goes straight to spacex
- Engineer2Throw 7y ago
  A military contactor? Not sure if you are aware but the money goes from corruption to private individual, not the other way around.
  - justaguy88 7y ago
    It's his personal toy, that just happens to take some military contracts
KennethSRoberts 7y ago
> Monday’s rally put Tesla’s market capitalization at $145 billion. Importantly for Musk, its stock market value reached a six-month average of $96 billion. Hitting a six-month average of $100 billion would trigger the vesting of the first of 12 tranches of options granted to the billionaire to buy Tesla stock as part of his two-year-old pay package. > Each tranche gives Musk the option to buy 1.69 million Tesla shares at $350.02 each. Taking Monday’s Tesla closing stock price of $798.75 as an example, Musk could sell those shares for a profit of $758 million. So it's $750m profit in each of the 12 tranches (assuming $TLSA holds)! That's nearly $9B in profit.
new_realist 7y ago
No. Elon can’t won’t sell his existing shares because he doesn’t want to dilute his voting power. Therefore, to spend money without borrowing, and to repay the debt he has already borrowed against his existing shares, he needs new shares. This makes them very valuable to him.

jonny_eh 7y ago

Then why have a compensation package like that if it's just a rounding error for him? Maybe people like him can't stand to lose out on a dollar, especially when they believe they deserve it.

toomuchtodo 7y ago
Going to Mars isn't cheap.

gamblor956 7y ago

Musk is worth $38.5 billion based on his current Tesla stock holdings at their current valuation. If he hits the trigger in his compensation package, he gets even more Tesla stock which will vastly increase his net worth on paper Also, Musk is loaded with debt because he leveraged his stock holdings to live a very lavish lifestyle, including multiple residential properties, vehicles, and very expensive dining choices.

ryanwaggoner 7y ago
There are no very expensive vehicles or dining choices when you’re worth tens of billions. It’s literally meaningless, like it would be for me if all my meals for a year cost me 1% of a penny.
- marnett 7y ago
  What about a catered party for 500 with staff and celebrity chef? The wealthy can throw lavish events that are not necessarily a drop in the bucket, especially if common.
  - tgsovlerkhgsel 7y ago
    Let's say this thing costs $200 per person, so $100k per party. Let's say he does this every day (or throws a 3.5x as lavish party twice a week), that's $36.5M per year. He can do this for 10 years and it will still literally be a rounding error in his wealth.
    - gamblor956 7y ago
      Of his current wealth on paper, yes. But almost all of Elon's wealth is in the form of his stock holdings, and stocks fluctuate in price. Moreover, his cash is almost all leveraged from his stock, and if the price collapses again, he could be wiped out by the margin call.
      - codeisawesome 7y ago
        I want to read a book (or a few!) full of these dynamics of wealth - what it means to be paper wealthy, what leveraging that can do for your lifestyle, and why people live in fear of the margin call. Can I please ask you for any recommendations?
      - texasbigdata 7y ago
        Or....he structured it as "let me borrow 60% of X, and here as some shares worth X as collateral.". Aka synthetically manufactured selling shared without actually doing it in order to fund his lifestyle. Depending on the advance rate (the 60% in this case), someone will do that deal. To take it to the absurd. If Elon wanted to fund his $35M daily party habit in the comment above, and he said to a bank "here is 3 billion in stock as pledged collateral which you can sell when the value goes to $500M but there's no recourse. Cool? Cool. " You would do that deal. So the margin call concept does not seem realistic.
microtherion 7y ago
Very expensive dining choices? How much truffled avocado toast do you have to eat to make a dent in his kind of wealth?
- madeofpalk 7y ago
  Flying premium cocaine in from wherever would be expensive, I guess. But in all seriousness, lifestyle expenses scale with your income.
  - nullc 7y ago
    > But in all seriousness, lifestyle expenses scale with your income. If you're foolish.
- dantheman 7y ago
  You do know he almost went bankrupt awhile back - starting companies is incredibly expensive and his wealth is in the ownership of the companies - not just an investment portfolio.
zaroth 7y ago
> If he hits the trigger in his compensation package, he gets even more Tesla stock which will vastly increase his net worth on paper. Elon currently holds ~34 million shares of Tesla. If TSLA market cap hits a 6-month running average of $100 billion his first of 12 tranches of stock options vest, which is 1.69 million shares at $350 per share. Musk will spend $591 million to buy the 1.69 million shares, which on the open market are worth $1.352 billion. What actually happens is he executes the options and immediately sells shares to cover the execution cost, for a net gain of ~950k shares. He then also has to sell shares to cover the taxes due at the time of exercise, which we'll under-estimate at 20% of the profit ($450 * 1.69 million * 20%) = $152 million. That's another 190,000 shares gone. Now we're down to a net gain of 760k shares on the 1.69 million. So when the tranche vests, he will own ~2.2% more TSLA stock than he did the day prior. Best case. If tax rate is higher, which it is because California, it's probably less than a 2% bump to Elon's overall TSLA holding. EDIT: Oh, one other thing. Any shares which are not sold to cover the strike price and the taxes due I believe must be held by Elon at least 10 years before he can sell any. So the primary effects of hitting a tranche are 1) it generates $591 million of cash flow for Tesla, a nice equity raise. 2) it generates at least $150 million in tax revenue for We The People.
- gamblor956 7y ago
  2.2% more stock is a huge amount of stock when you're already talking about the company's biggest individual shareholder. That aside, a HNWI would never liquidate stock to exercise options or to pay taxes, since each action triggers a realization event and an associated tax liability. They would take out loans secured by the stock, since that doesn't result in a huge tax bill. So in the real world, Musk would use the $591 million cash he already has in the bank (having previously taken out loans against his Tesla shares) and use that to exercise his options. He would then use some of the remaining few billion in his bank account (again, from the loans secured by his Tesla shares) to pay any state and federal taxes owed. The only time HNWIs deliberately trigger taxable events is when they have losses or credits to absorb the resultant tax liability.
  - zaroth 7y ago
    I believe that the taxable event happens when the option is exercised, whether any shares are sold or not. Actually selling the shares doesn’t change the amount of tax due. I don’t know that he will sell shares to cover the strike price or the taxes, but I can say certainly it is explicitly permitted for him to sell shares only for that reason. Otherwise they must be held for at least (EDIT) 5 years post exercise. He can simply hold the vested option but not exercise it. All options expire by 2028, and all vested options must be exercised within 1 year if he loses the CEO title. He does not gain any shareholder rights from those shares until the options are exercised. So this delays the payment of the strike price and taxes, but does not alter the basic math. In short, a 2% bump in his equity position is below the noise floor of the daily price change of the actual shares. Frankly it almost makes you wonder what’s the point. Once you own double digit percentages of an asset that could appreciate more than 10x it’s more important to focus on the size of the pie than the size of your slice. The vast change in Elon’s wealth was through achieving an IPO and getting the share value upwards of $800. An extra few million shares to him is the same as the difference between selling on a Monday or a Tuesday.
BurningFrog 7y ago
This might make sense for $38.5 million. For $38.5 billion, no lifestyle choice in the world has any impact on that money.
- deleted 7y ago
  [deleted]
- gamblor956 7y ago
  Elon Musk does not have $38.5 billion in unencumbered cash. Almost all of his cash is from loans taken against his Tesla stock. If Tesla stock loses value, Elon Musk faces the risk of a margin call. In fact, this almost happened last year and the year before. It's one of the reasons that he wastes so much time going after shorts; it's not for fun--it's a matter of personal financial survival.

madeofpalk 7y ago

People don’t get and stay rich by not earning money.

NotSammyHagar 7y ago
Unless you say inherited a giant amount from your family, which can cover a lifetime amount of idiocy. Hmm.

wfbarks 7y ago

Bonus probably goes straight to spacex

Engineer2Throw 7y ago
A military contactor? Not sure if you are aware but the money goes from corruption to private individual, not the other way around.
- justaguy88 7y ago
  It's his personal toy, that just happens to take some military contracts

KennethSRoberts 7y ago

> Monday’s rally put Tesla’s market capitalization at $145 billion. Importantly for Musk, its stock market value reached a six-month average of $96 billion. Hitting a six-month average of $100 billion would trigger the vesting of the first of 12 tranches of options granted to the billionaire to buy Tesla stock as part of his two-year-old pay package. > Each tranche gives Musk the option to buy 1.69 million Tesla shares at $350.02 each. Taking Monday’s Tesla closing stock price of $798.75 as an example, Musk could sell those shares for a profit of $758 million. So it's $750m profit in each of the 12 tranches (assuming $TLSA holds)! That's nearly $9B in profit.

new_realist 7y ago

No. Elon can’t won’t sell his existing shares because he doesn’t want to dilute his voting power. Therefore, to spend money without borrowing, and to repay the debt he has already borrowed against his existing shares, he needs new shares. This makes them very valuable to him.