The Tesla board made a gold chain and is going to give Musk a trillion dollars.
Will Musk become the world's first trillionaire in human history? The Tesla board has crafted a "golden chain" just for him.
In the past few years, as Tesla's stock price soared continuously and its market value exceeded one trillion dollars, making it the top - ranked global automobile company in terms of market value. Musk successfully unlocked his performance - based rewards, and his personal assets exceeded $400 billion, propelling him to the top as the world's richest person.
Now, he has a chance to become the world's first billionaire with assets exceeding one trillion dollars. To achieve this lofty goal, he needs to stay at Tesla for ten consecutive years and lead Tesla to accomplish even more arduous performance and market - value challenges than seven years ago.
A Multitasking CEO
Last Friday, the Tesla board submitted a regulatory filing, proposing a new compensation package for CEO Elon Musk, which will be voted on at the shareholders' meeting on November 6th. Based on the previous voting history of shareholders, there should be no problem with the approval of this compensation package.
Tesla has a retail - investor ownership ratio as high as 42%, the highest among companies in the trillion - dollar market - value club. In contrast, the retail - investor ownership ratios of Google and Meta are even less than 20%. Most of these retail investors are staunch supporters of Musk. They have approved Musk's sky - high compensation packages several times because they believe in Musk's grand vision and his ability to achieve remarkable performance goals.
According to this new compensation package, if Musk successfully meets all the performance targets, he will receive Tesla stock options worth up to $900 billion, and his stake in Tesla will double to one - quarter. This is exactly the proportion of voting rights for security that Musk previously requested.
Of course, Musk's personal assets are not limited to Tesla. He also holds majority stakes in companies such as SpaceX, xAI, Neuralink, and The Boring Company. The valuations of SpaceX and xAI are soaring rapidly with the boom in the aerospace and AI sectors, currently reaching $400 billion and $200 billion respectively. Musk holds 42% and 54% of the shares in these two companies. It's worth noting that the value of Musk's stake in SpaceX actually exceeds that of his stake in Tesla.
Simultaneously running multiple listed and startup companies in different regions, spanning multiple fields such as electric vehicles, space exploration, artificial intelligence, social networks, and rail transit, while also being deeply involved in political struggles in the United States and Europe, one can't help but marvel at Musk's time and energy management skills.
It's worth mentioning that Musk is accustomed to having his companies invest in each other and allowing the circulation of management and technical personnel among them, creating a complex business - empire network. This is to optimize resources, maintain control, and obtain more financial support.
When he acquired Twitter, he borrowed $1 billion from SpaceX and transferred Tesla engineers to Twitter for layoff evaluations. Additionally, Musk had SpaceX invest $2 billion in xAI and had Tesla purchase xAI's systems to support his AI startup. Next month, Tesla shareholders will also vote on a plan to invest in xAI.
For startups like SpaceX and xAI, these operations only need the approval of the board of directors, and Musk himself is the largest shareholder. However, for the listed company Tesla, these operations may be suspected of encroaching on shareholders' rights and have previously led to shareholder lawsuits against Tesla.
A $900 - Billion Incentive
To attract this "multitasking" CEO and have Musk focus his main energy on Tesla's operations, the Tesla board has carefully designed a generous yet challenging performance - based compensation target this time. Whether Musk meets the target or not, the board has achieved its goal.
To receive the astonishing $900 - billion compensation, he must lead Tesla to reach a market value of $8.5 trillion in the next ten years, more than twice that of NVIDIA, the company with the highest market value globally at present (over $4 trillion). Of course, NVIDIA's market value may also double in ten years.
Currently, Tesla's market value is around $1.1 trillion, which means Musk needs to drive Tesla's stock price to eight times its current level in the next ten years. As Tesla's market value soars from $1 trillion to $8.5 trillion, Musk will receive 3.53 million stock options each time Tesla reaches a performance milestone.
In addition to achieving the stock - price and market - value targets, Musk also needs to meet multiple performance targets. These targets include increasing the operating profit from $17 billion last year to $400 billion, delivering a cumulative total of 20 million Tesla vehicles, increasing the number of active FSD users to 10 million, delivering 1 million Tesla robots, and operating 1 million driverless taxis (Robotaxi).
Tesla board chair Robyn Denholm and director Kathleen Wilson - Thompson said that retaining Musk "is crucial for Tesla to achieve these goals and become the most valuable company in history."
The most important thing is that to receive these options, Musk must still be serving as Tesla's CEO or in another approved executive role when the shares vest. If none of the targets are achieved by the end of the ten - year plan, the related rewards will be cancelled. If Musk stops leading Tesla, all unvested shares will be forfeited, unless under specific circumstances (such as a qualifying termination or a change of control). In other words, the Tesla board has set what seems like an impossible task for Musk, tying him to Tesla for ten years.
An Impossible Task
To receive this astonishing $900 - billion bonus, Musk may have to work even harder than he did for the 2018 compensation package. However, the 2018 compensation plan also seemed like an impossible task at that time, yet Musk ultimately accomplished it.
On January 23, 2018, the Tesla board approved a long - term performance - based reward plan for Musk, which was regarded as one of the largest CEO compensation packages in the history of American enterprises. The total potential value of this plan was as high as approximately $56 billion (based on stock options), aiming to motivate Musk to achieve the company's long - term growth goals.
To receive these options, Musk needed to lead Tesla to increase its market value from about $59 billion at that time to $650 billion (in increments of $50 billion). Each market - value milestone needed to be maintained for at least six months (based on 30 - day and 180 - day trading averages). The options were exercisable at a price of $350 per share, and Musk was required to hold the shares for at least five years after unlocking them.
Musk achieved it. As Tesla's market value exceeded one trillion dollars, Musk unlocked all 12 tranches, receiving approximately 12 billion stock options and accomplishing an astonishing growth goal. However, exercising the options required tax payment. As a result, Musk sold over $10 billion worth of Tesla stock from 2021 - 2022 to pay $11 billion in taxes, causing his stake in Tesla to drop from about 20% to 13%.
Ironically, this extremely aggressive compensation plan was sued by Tesla shareholders and was rejected by a Delaware judge in January 2024. After Tesla shareholders approved it again last year, it was rejected by the judge once more. The Tesla board had to introduce an alternative compensation package last month to make up for Musk's potential losses.
Having completed the task but not receiving the reward, an enraged Musk transferred Tesla's registration from Delaware to Texas, where the commercial courts are more inclined to protect corporate interests. Therefore, there's no need to worry about this $900 - billion compensation plan being sued by shareholders.
Tesla's Future Lies Beyond Cars
However, this time, it may be even more difficult for Musk to meet the compensation targets than it was in 2018. Tesla is in an unprecedented strategic transformation period. The traditional electric - vehicle business has stagnated or even declined significantly, while the new businesses have not generated any actual revenue yet.
In the world's three major electric - vehicle markets - China, the United States, and Europe - Tesla has faced a comprehensive decline. Due to Musk's deep involvement in political struggles and his sharp right - turn in stance, he has become the target of boycotts and protests from liberal - leaning people in the United States and Europe, who are the main consumers of electric vehicles. In China, the largest electric - vehicle market, Tesla has faced the strong rise of domestic electric - vehicle brands. In the fierce market competition, Tesla's models are aging, the interiors are simple, and the range is no longer competitive.
To drive Tesla's performance and stock price to continue growing and achieve his performance targets, Musk can no longer rely on the electric - vehicle business, which is in a downward spiral. Tesla's electric - vehicle sales declined by 1% last year and plummeted by 7% in the first half of this year, making it almost impossible to resume growth. In several of Tesla's previous earnings - report press conferences, Musk didn't even mention how to boost the electric - vehicle business, losing the ambition he had three years ago of selling 20 million vehicles annually.
Actually, it seems that Musk's interest is no longer in electric vehicles. In the past five years, facing an increasing number of competitor products, apart from the poorly - selling Cybertruck, Tesla has not launched any new models, only making revisions to the Model Y and Model 3. Although the Model Y is still a top - choice electric vehicle, it's no longer sufficient to stimulate market - sales growth.
Investors and analysts are also well - aware that Tesla's future no longer lies in selling electric vehicles. In the earnings - report press conferences of the past few quarters, analysts no longer ask questions about how to boost electric - vehicle sales. Instead, they, along with Musk, are pinning their hopes for future growth on autonomous driving and robots, even though these businesses have not generated any revenue yet.
Musk said that 80% of Tesla's future value will come from autonomous driving and robots. According to Walter Isaacson, the author of Musk's biography, Musk told him that autonomous - driving technology could "make Tesla a ten - trillion - dollar company." One can imagine that Musk may be confident in completing the board's task.
The Fourth - Generation Master Plan
Just before the Tesla board granted Musk the $900 - billion compensation plan last week, Musk released the latest "Fourth - Generation Master Plan" (Master Plan IV) for Tesla. It doesn't mention any new electric vehicles under development but is an ambitious white paper envisioning the future world.
In Musk's envisioned future, Tesla - made humanoid robots will free us from trivial tasks, creating a utopia of "sustainable abundance." Transportation will be provided by Tesla's driverless taxis, and electricity will be supplied by Tesla's energy - storage products.
In Tesla's 23 - year history, only three "Master Plans" have been released, all of which have pointed out the strategic direction for the company's subsequent development. The first Master Plan in 2006 outlined Tesla's electric - vehicle roadmap: starting with expensive electric vehicles and then using the profits to expand to more affordable models. This has become the development white paper for electric - vehicle startups, and almost all of Tesla's competitors still follow this roadmap to this day.
The 2016 "Master Plan" planned for more electric - vehicle models, including future SUVs and pickups. The launch and market entry of the Model Y were the direct driving forces behind Tesla's soaring market value. This model remains the world's best - selling electric vehicle to date. However, Musk had already envisioned the future of autonomous driving in 2016, imagining Tesla cars going out to pick up passengers and charge themselves, bringing additional revenue to car owners. The third "Master Plan" released in 2023 was a 41 - page white paper about the future of sustainable energy and how it would power the autonomous vehicle fleet.
The fourth Master Plan focuses on artificial intelligence, namely autonomous driving and robots. In the video of this plan, one can see Tesla vehicles driving autonomously and Tesla robots busy performing various tasks, from heavy - duty to trivial, in factories and homes.
Although Tesla launched the steering - wheel - less driverless taxi Cybercab last year, it won't go into production until next year, and delays in Tesla's new - model launches have become the norm. However, Tesla's future in autonomous driving doesn't rely on the CyberCab but on the Model Y equipped with FSD.
After two months of trial operation in Austin, Texas, Tesla has launched the Robotaxi service in the United States. However, this is not true driverless operation like Google's Waymo but a ride - hailing service similar to Uber with a safety driver in the driver's seat. According to Musk's vision, Robotaxi will serve half of the U.S. population by the end of this year. This aggressive expansion strategy is clearly different from Google Waymo's steady - paced approach.
Robots are another major future pillar for Tesla. Tesla wrote in the plan that "research analysts estimate that by 2050, the global sales of the humanoid - robot industry may soar to approximately $4.7 trillion. Based on this prediction, Tesla is developing Optimus, a humanoid robot, with the long - term vision of transforming the labor force and productivity in business and households."
Recently, Tesla opened a robot - themed restaurant in Los Angeles, using many Optimus robots as waiters to showcase its robot - business technology and future vision. However, in a video of Salesforce CEO Marc Benioff's visit to the Tesla factory, Optimus still responded slowly when communicating with humans, indicating that there's still a long way to go before it can be put into practical use.
Deploying 1 million Robotaxis and 1 million Optimus robots in the next ten years poses a huge challenge for Tesla.
It's worth noting that although Musk's previous involvement in political struggles has seriously damaged Tesla's brand in the United States and Europe, the Tesla board didn't set any restrictions on his political activities in the compensation plan. Apparently, they don't want to anger or restrict Musk.
From another perspective, even if Musk fails to lead Tesla to achieve these performance targets, he will still invest a large amount of energy, if not the majority, in Tesla's future operations, especially in the autonomous - driving and robot businesses.