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> and probably get his $56 billion pay package approved Maybe I'm not understanding something here, but how does him getting the $56B not crash TSLA stock and

> and probably get his $56 billion pay package approved Maybe I'm not understanding something here, but how does him getting the $56B not crash TSLA stock and the ultimately the company? AFAIKT TSLA has only made about $32B in profit during it's entire existence as a company (and that could be an overestimate - I don't think it accounts for earlier losses which would take it closer to $27B). So why should Musk get almost 2X that? Why would any shareholder (other than Musk) vote for this kind of payout?

s1artibartfast 3y ago
You are freely conflating profits and stock valuation, which aren't comparable. The vote is basically on if the shareholders want to honor musks 2018-2022 comp package, which was recently thrown out. The deal was that if Elon got the stock to 600 billion for shareholders, he got to keep 50 billion.
- boringg 3y ago
  I mean the fact that the comp package got thrown out well after it being approved and him making the metrics is mind blowing. It is not honoring a deal but hey - someone has to pay the lawyers.
  - s1artibartfast 3y ago
    Yeah, I'm split on the issue. The court was right on the technicalities around disclosure, but it was also plain as day the board was musks buddies and the stockholders still approved it the first time. Could the board have negotiated a better deal if they weren't buddies? Probably, but that's why board composition matters. The judge said they thought Musk would have made the milestones without the comp because he already had skin in the game. Ex-post facto recontacting is just icky overall.
  - everforward 3y ago
    This is just kind of an artifact of how our legal system works. Judges don't generally answer hypotheticals, you have to do it and then see how it pans out. All that being said, I would be pretty surprised if this outcome wasn't mentioned as a risk to the board or Musk. They're talking about paying him ~10% of the company's _market cap_ as a bonus, and almost double the revenue the company has made in its entire existence. I'm not terribly surprised that a judge looked at that and immediately thought "breach of fiduciary responsibility to the shareholders". That brings up an awful lot of questions. Does it really take $50B to motivate him, given that his wealth is largely denominated in TSLA stock anyways (meaning he suffers if the stock price drops)? Is there really no one who would do it for cheaper? Firing Elon and hiring a $200M/year CEO would save the company like $50B; why is the board so confident that Elon is going to provide more value to the company than saving $50B on labor costs? Perhaps paying Elon is the right move to make. I'm dubious, but I'm also not a shareholder, so my opinion does and should mean basically nothing. I do hope that if the shareholders vote to approve the bonus, they're allowed to pay it out. They're adults, they should be allowed to do what they believe is in their best interest.
    - s1artibartfast 3y ago
      The first time the compensation was approved, it was through shareholder vote with Elon abstaining. The question raised later was not if the shareholders were adults allowed to approve it, but if the information they were given about the board negotiators had sufficient disclosure. Inadequate disclosure on paper legally opened the door to questioning if the negotiator of Health fiduciary duty to the shareholders. My personal opinion is that a different CEO then Elon could not have generated 500 billion dollars of irrational hype. Additionally, I think that if Elon left in 2018, there could have been substantial reputational damage to Tesla. Negotiations between two parties who both stand to profit heavily are tough. They are tough because Leverage is based on who is more willing to self-destruct and walk away
indigoabstract 3y ago
It was about reaching a certain stock valuation only, not the the profits. Public companies are strange creatures. You'd expect a company's valuation to be proportionally tied to its revenue and profit, but it rarely is and Tesla is an extreme case of this.
- robertlagrant 3y ago
  > You'd expect a company's valuation to be proportionally tied to its revenue and profit, but it rarely is and Tesla is an extreme case of this. No, you'd expect it to be tied to the market's assessment of the company's total lifetime value. That will hopefully be informed by revenue and profit, but isn't limited to those, as disruptive companies might be round the corner about to wipe it out, or vice versa.
  - indigoabstract 3y ago
    Yes and since no one can accurately predict that, its valuation is based more on speculation, rather than what could be extrapolated from the numbers alone. Which is probably a bit counterintuitive for most people. At least for me it was.
    - Breza 2y ago
      Matt Levine has a great newsletter where he regularly delves into questions like this. He recently wondered, somewhat seriously, if the era of valuing stocks based on fundamentals was a fad that's now over.
    - lotsofpulp 3y ago
      All valuation is based on speculation. “The numbers” are always subject to change.
      - indigoabstract 3y ago
        I guess I was thinking about how a more regular/predictable business would usually be sold by its owners for a multiple of its yearly revenue, for example. Would the same apply to unicorns? Probably not, because they're special.

s1artibartfast 3y ago

You are freely conflating profits and stock valuation, which aren't comparable. The vote is basically on if the shareholders want to honor musks 2018-2022 comp package, which was recently thrown out. The deal was that if Elon got the stock to 600 billion for shareholders, he got to keep 50 billion.

boringg 3y ago
I mean the fact that the comp package got thrown out well after it being approved and him making the metrics is mind blowing. It is not honoring a deal but hey - someone has to pay the lawyers.
- s1artibartfast 3y ago
  Yeah, I'm split on the issue. The court was right on the technicalities around disclosure, but it was also plain as day the board was musks buddies and the stockholders still approved it the first time. Could the board have negotiated a better deal if they weren't buddies? Probably, but that's why board composition matters. The judge said they thought Musk would have made the milestones without the comp because he already had skin in the game. Ex-post facto recontacting is just icky overall.
- everforward 3y ago
  This is just kind of an artifact of how our legal system works. Judges don't generally answer hypotheticals, you have to do it and then see how it pans out. All that being said, I would be pretty surprised if this outcome wasn't mentioned as a risk to the board or Musk. They're talking about paying him ~10% of the company's _market cap_ as a bonus, and almost double the revenue the company has made in its entire existence. I'm not terribly surprised that a judge looked at that and immediately thought "breach of fiduciary responsibility to the shareholders". That brings up an awful lot of questions. Does it really take $50B to motivate him, given that his wealth is largely denominated in TSLA stock anyways (meaning he suffers if the stock price drops)? Is there really no one who would do it for cheaper? Firing Elon and hiring a $200M/year CEO would save the company like $50B; why is the board so confident that Elon is going to provide more value to the company than saving $50B on labor costs? Perhaps paying Elon is the right move to make. I'm dubious, but I'm also not a shareholder, so my opinion does and should mean basically nothing. I do hope that if the shareholders vote to approve the bonus, they're allowed to pay it out. They're adults, they should be allowed to do what they believe is in their best interest.
  - s1artibartfast 3y ago
    The first time the compensation was approved, it was through shareholder vote with Elon abstaining. The question raised later was not if the shareholders were adults allowed to approve it, but if the information they were given about the board negotiators had sufficient disclosure. Inadequate disclosure on paper legally opened the door to questioning if the negotiator of Health fiduciary duty to the shareholders. My personal opinion is that a different CEO then Elon could not have generated 500 billion dollars of irrational hype. Additionally, I think that if Elon left in 2018, there could have been substantial reputational damage to Tesla. Negotiations between two parties who both stand to profit heavily are tough. They are tough because Leverage is based on who is more willing to self-destruct and walk away

indigoabstract 3y ago

It was about reaching a certain stock valuation only, not the the profits. Public companies are strange creatures. You'd expect a company's valuation to be proportionally tied to its revenue and profit, but it rarely is and Tesla is an extreme case of this.

robertlagrant 3y ago
> You'd expect a company's valuation to be proportionally tied to its revenue and profit, but it rarely is and Tesla is an extreme case of this. No, you'd expect it to be tied to the market's assessment of the company's total lifetime value. That will hopefully be informed by revenue and profit, but isn't limited to those, as disruptive companies might be round the corner about to wipe it out, or vice versa.
- indigoabstract 3y ago
  Yes and since no one can accurately predict that, its valuation is based more on speculation, rather than what could be extrapolated from the numbers alone. Which is probably a bit counterintuitive for most people. At least for me it was.
  - Breza 2y ago
    Matt Levine has a great newsletter where he regularly delves into questions like this. He recently wondered, somewhat seriously, if the era of valuing stocks based on fundamentals was a fad that's now over.
  - lotsofpulp 3y ago
    All valuation is based on speculation. “The numbers” are always subject to change.
    - indigoabstract 3y ago
      I guess I was thinking about how a more regular/predictable business would usually be sold by its owners for a multiple of its yearly revenue, for example. Would the same apply to unicorns? Probably not, because they're special.