Elon Musk’s next massive payday is approaching

CEO Elon Musk receives no cash salary or bonus. He only pays with stock options. But he has pretty much used the options available from the compensation package he received from Tesla in 2018, a package that proved to be the most lucrative package of stock options issued by any company, according to Courtney Yu, research director at Equilar’s management compensation firm.

The 93.9 million options Musk has received so far from that package were worth $ 86.8 billion at the end of Friday, after taking into account the exercise price.

Musk got 25.3 million of these options this past week due to the record revenue Tesla released on Wednesday. He is likely to receive another 8.4 million options soon, probably after the company publishes results for the second or third quarter, based on analysts̵[ads1]7; revenue forecasts for the company.

But these 8.4 million options, worth billions, are a relatively small part of what Musk can eventually receive. When he receives these additional options, he will have received all the 101 million split-adjusted options that were part of the 2018 salary package. The question should be whether he gets even more options, maybe tens of millions more options.

Musk avoided a question about such a salary during an investor interview on Wednesday, and simply said, “There are no discussions going on for incremental compensation for me.”

But that does not mean he will not be offered that kind of salary in the future.

Not all technology managers get alternatives

Some technology billionaires have done well without stock options.

Amazon (AMZN) founder Jeff Bezos, who is the world’s second richest person, (worth about $ 100 billion less than Musk, and Facebook (FB) founder Mark Zuckerberg has not received stock subsidies or options since the companies’ first public offerings in 1997 and 2012, respectively. Nor have they earned much in salary. Bezos received $ 81,000 a year in salary while he was CEO, and Zuckerberg has taken home a salary of $ 1 a year for most of the last decade.

They benefited from the huge increase in the value of the shares they have had since their companies were listed on the stock exchange.

Much of Musk’s net worth, estimated at $ 270 billion, comes from appreciation of Tesla shares. But he has also regularly received stock options as a form of compensation since 2009, the year before the company’s listing.

He has exercised many of these options as they expire. Virtually all of his remaining options come from his 2018 payment package.

Wall Street wants more Musk options

Many analysts believe it is only a matter of time before Tesla comes up with another package of Musk options.

Alex Potter, analyst at Piper Sandler & Co. who asked Musk about a possible new compensation package at Wednesday’s investor talk, took a moment to say that the previous package “seemed to work quite well.”

And 81% of Tesla shareholders who voted for Musk’s salary package in 2018 approved it. Other analysts believe a new package will be good for the company, as well as Musk.

“Eventually, the board will reload Elon’s plan. And that plan will be massive, just like the previous plan,” said Gene Munster, managing partner of Loup Ventures. “Elon thinks big, and he has huge new markets to go after and build big businesses including autonomy and robots.”

Is there a PR site by giving the world’s richest person more options that can add tens, if not hundreds of billions, to his wealth?

“Elon is the richest person in the world and he can still appeal to hardworking people,” Munsger said. “These people would mostly cheer on him with a massive new package deal.”

A new option package for Musk could do much to reassure investors who are worried that he may lose focus on Tesla due to his CEO of SpaceX or his interest in buying and transforming Twitter.

“It will make Tesla investors sleep better at night and know he has a five- to 10-year comp package signed, sealed and delivered,” said Dan Ives, technical analyst at Wedbush Securities.

Does Musk need more options to care about Tesla?

It’s hard to imagine anyone being as wealthy as Musk, and as passionate as he is for Tesla, motivated to spend more or less time with the company based on what he gets in his next compensation package. And if money is a motivating factor, the value of his current 265.5 million Tesla shares and options should provide all the incentives he needs.

“He is already financially motivated for Tesla to continue to do well,” said Equilars Yu.

But proponents of a new package say it will answer many of the doubts about Musk’s focus that has swirled since he announced his plans to buy Twitter (TWTR).

“Even if his DNA is not going to change whether he has new Tesla options or not, the street will want him to have another comp package,” Ives said.

There are costs for Tesla involved in giving Musk more options, even if it is non-cash compensation. The estimated carrying amount of these options is shown as an expense in the income statement. Last year, Tesla booked $ 571 million in expenses related to Musk’s 2018 salary package alone. If he does not get a new one, that expense will disappear from the income statement.

Why Tesla investors might need to worry about Elon Musk's Twitter distraction

And while a new package for Musk is guaranteed to be criticized by those who believe executives get paid too much, Tesla shareholders, and no one else, will make that decision.

“Musk is already either a hero or a villain in people’s eyes,” Ives said. “A new package will either make people hate him more, or be relieved that he stays.”

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