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Elon Musk just confirmed his new threat to Tesla shareholders.
Give me 25% of Tesla (NASDAQ: TSLA) or else…
I will NOT build robotic and AI products at the company.
Back in 2018…
Tesla was at a very different stage as a company than it is today.
It had just lost $2.2 billion. The launch of the new Model 3 was delayed. And Tesla was experiencing “production hell.”
It was at that exact moment when Elon Musk made a big request.
He wanted the Tesla board to pay him $56 billion in stock.
And the board said YES.
The deal meant that Musk would receive $0 salary.
Instead, he’d receive stock options that could give him an additional 12% ownership in Tesla.
The stock options would be issued based upon Tesla’s market value and hitting financial targets.
At the time Tesla’s total market value was $52 billion.
Elon would have to grow the company to $650 billion to unlock all of the stock options.
Against all odds…
That’s exactly what happened by late 2021.
Now, to be paid $56 billion in stock is a lot of money by all standards.
But it’s hard to argue with the massive growth Tesla has had since then.
Is any Tesla shareholder complaining about the 967% growth they’ve seen?
Here’s how this relates to today…
Elon says he needs to own 25% of Tesla to remain motivated.
He confirmed this last Sunday when he replied with a YES to this post…
Currently he owns about 13%.
If his compensation package goes through, he will be closer to 18% (assuming that he sells some shares to pay for taxes).
But Elon wants 25%.
That would mean giving him options for 7% of the company – worth $38.85 billion.
It’s unlikely that the Tesla board will simply GIVE Elon 7% of TSLA stock.
Instead, they’d likely use stock options vesting over the next 5 – 10 years.
The options would vest based upon new milestones…
Such as Tesla growing its market cap to $3 or $4 trillion.
Should Elon get a huge stock options grant – if he can grow Tesla stock by 440%?
My view is that he SHOULD get a new stock options grant.
Just look at what happened the last time Elon’s interests were aligned with shareholders.
Right now, he doesn’t have any compensation or options.
Shareholders should want Elon 100% focused on Tesla. And I’m happy to give him more shares to make that happen.
What do you think?
Ian