Elon Musk Just Unlocked A $2.7 Billion Bonus – The Second Tier In His Unique Compensation Plan

Elon Musk is having a great week and a great year. Since the start of the year, Elon Musk’s net worth has grown by $ 51.5 billion, from $ 27.5 billion on January 1 to $ 79 billion as of that point. The only person on the planet who has done better over the same time period, as you probably could have guessed, is Jeff Bezos. Since the start of the year, Jeff Bezos’ net worth has grown by $ 71 billion, from $ 115 billion to $ 186 billion, as of this writing.

Side note: At $ 186 billion, Jeff Bezos is richer than the combined values ​​of Nike ($ 122 billion), Costco ($ 145 billion) and McDonald’s ($ 143 billion). He could literally buy both Goldman Sachs ($ 73 billion) AND Starbucks ($ 88 billion) and still have about $ 14 billion in change.

But we’re here to talk about Elon.

When we talk about Elon Musk, we have to remember that his net worth is attributable to TWO companies, Tesla and SpaceX. He owns 54% of SpaceX and 22% of Tesla.

For Elon to have his current net worth of $ 79 billion, here’s how it breaks down:

  • SpaceX – $ 15 billion
  • Telsa – $ 63.8 billion

= $ 78.8 billion

SpaceX is a private company and its value doesn’t change too drastically. Movements in Telsa’s share price have the biggest impact on Musk’s net worth. But that’s not the only way he’s making money from the electric car company …

(Photo by Joe Raedle / Getty Images)

Elon has a one-time payment plan with Tesla.

Put simply, Elon doesn’t earn a single dollar of Tesla salary. Instead, he has an extremely unusual compensation plan that grants him 1.69 million new shares every time the company increases its market cap by $ 50 billion… up to $ 650 billion. It must contain each increase of $ 50 billion for six months.

Think of the 12 market cap goals like levels in a video game. The levels start at a market cap of $ 50 billion, then $ 100 billion, then $ 150 billion…. ending at $ 650 billion. To beat each level, over a six month period, it needs the total value of the business to be held for six months above the milestone amount.

If he hit each goal, that would mean the company would ultimately have a market cap of $ 650 billion, more than double what it is today. At this level, if Elon didn’t sell any of his free shares along the way, his significant shares would be worth $ 100 billion.

When Elon and Tesla’s board of directors struck the deal in 2018, the company had a market capitalization of $ 50 billion. At the time, many industry analysts actually predicted the company’s value would drop by half or more.

Don’t bet against Elon and Tesla.

Elon hit that first level – a six-month average market cap north of $ 100 billion – in May 2020. At that time, he received 1.69 million new shares, which were worth $ 700 million at the time. time of award.

He hasn’t sold any of those shares so far, which means those 1.69 million shares at the current share price are now worth around $ 2.7 billion. If he has never sold the shares, he must first buy them for $ 350 (the strike price). So at the current level, those 1.69 million shares could turn into $ 2.1 billion in profit (before tax).

Surprisingly, after taking two years to beat the first level, it only took three months for him to reach the second level. The second tier required the stock to maintain a market capitalization above $ 150 billion for six months.

He unlocked this level YESTERDAY!

How can he get a six month bonus in just three months? Because it’s a six-month moving average and Tesla has absolutely exploded over the past few months, pushing the average up along the way.

Today, the company’s total market capitalization is just under $ 300 billion. When you take that out of six months, the average is surpassed above the $ 150 billion he needed to unlock the second tier.

When the company confirms the bonus with the SEC and physically transfers the 1.69 million shares, they are worth the same $ 2.7 at the current share price as its first tranche. About $ 2.1 billion if it sells today, after the strike price.

That’s $ 4.2 billion in pre-tax profit if he sold both pieces.

If Elon takes each step and never sells a single stock, he could ultimately end up with a net worth of around. 200 billion dollars. In today’s ranking, that would indeed make him the richest person in the world. But who can say how the richest in the world will rank in a year or even six months. The fortunes of Jeff Bezos and Amazon certainly don’t seem to be slowing down.

But. This article is about Elon Musk.

Congratulations to Elon on an amazing year and for unlocking your second bonus!

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