• Underway to becoming tentative trillionaire

Sopuruchi Onwuka, with agency reports

American tech billionaire, Elon Musk, who is already the world’s richest person, is in deal with the board of troubled electric vehicle (EV) maker, Tesla, to focus on growing the company with more tech add-ons if he is granted greater payments with the company’s stock.

The 423.7 million new shares he demands in order to keep his focus on running the company are worth $143.5 billion at current stock value and hold potential to make him world’s first trillionaire; but the Tesla stock allocation comes with a target that might be difficult for the CEO to meet under emerging competition in the global EV market and changes in the local fiscal environment for the automobile industry.

According to the deal, Musk would get those shares only if the value of Tesla stock increases significantly to an overall value of $8.5 trillion, significantly above the current market capitalization of $1.1 trillion.

Musk does not receive a cash salary from Tesla. All of his compensation comes from Tesla shares and options he has been granted in the past. Since there is still an ongoing court fight over the 304 million options, Musk has not received any compensation for nearly a decade, since a 2012 pay package made its last disbursement of options to him in 2017.

Elon Musk is already the richest person on the planet, worth $378 billion according to Bloomberg’s billionaire tracker. He currently owns 410 million shares of Tesla shares, worth $139 billion, along with his stakes in xAI, rocket company SpaceX, and several other companies he has started and runs

Those 423.7 million new shares that Musk would get under this package would be worth close to $1 trillion should the company hit the increased valuation targets spelled out in Friday’s proxy statement.

Despite lagging in sales numbers among competing auto brands, Tesla is already the most valuable automaker by a large margin; and if its shares are able to reach the $8.5 trillion market capitalization value, it could become the most valuable company ever and would be worth roughly double the current market value of Nvidia (NVDA), the current most-valuable company on the market.

The company’s proxy statement that laid out Musk’s payment plan also included a shareholder proposal that Tesla take a stake in privately-held xAI, the artificial intelligence company that Musk also owns. That could help Elon Musk further consolidate his growing business empire.

XAI recently purchased the social media platform, X, which Musk bought for $44 billion of his own money in 2022. And any such investment could further enrich Tesla since Musk is the primary owner of xAI.

A judge in Delaware has twice struck down the 2018 pay package that granted Musk options to buy additional 304 million shares of Tesla. But Musk secures overwhelming approval of Tesla shareholders who try to grant him the options again this year. And with the options, Musk now owns 18% of Tesla shares.

Musk has continued to predict that his plans for self-driving cars – including a robotaxi service – will create massive profits and value for shareholders. The robotaxis would provide rides to passengers and also allow Tesla owners to rent out their cars for driverless rides when not in use.

Musk has also promised a line of humanoid robots that could bring in even more sales than Tesla’s car business.

Market pundits agree that it was wise for Tesla shareholders to invest in keeping Musk as the company’s CEO, citing his pedigree with big tech innovations.

Analyst at Wedbush Securities, Dan Ives, is quoted in a CNN report on Friday as saying: “It’s a big pay package but Tesla needs to keep its biggest asset in Musk as CEO.”

“In this AI era Musk now will drive its next leg of growth,” Ives added. “The Board had a $1 trillion dollar decision and made the right one.”

With the promise of greater stake in the company, Tesla board emphasized the importance of keeping Musk focused on the company going forward, and possibly distracting him from active politics.

Tesla board stated that “Musk also raised the possibility that he may pursue other interests that may afford him greater influence if he did not receive such assurances.” The board said it “believes that Mr. Musk singularly possesses the leadership characteristics necessary to transform Tesla and realize its long-term mission at an unparalleled level.”

But the company said it is also working on succession plans, saying Musk must “developed a framework for Chief Executive Officer succession” as one of the terms for receiving the final 70 million shares of stock.

The board said those succession plans are “for both sudden, unanticipated events, in addition to longer-term planned succession for its executives.” It added that it “believes that management has developed a robust pipeline of seasoned leadership talent within Tesla,” and that is also looking at possible external talent.

But not all tech billionaires receive additional stock options or grants as compensation, instead benefiting from the increased valuations of their existing stakes in their companies. That includes Amazon founder Jeff Bezos and Mark Zuckerberg, who co-founded Facebook. Both took large stakes in their companies as founders, but neither has received stock grants or options since those companies had initial public offerings in 1997 and 2012, respectively.

Analysts predict that Musk would become far wealthier even without any additional shares of Tesla stock. His current holdings of 410 million Tesla shares, even without the disputed 304 million options, would be worth nearly $1 trillion more than today’s valuation, should Tesla’s market cap rise to $8.5 billion.

But to achieve that target, it would have to start doing the things Musk is promising in terms of self-driving vehicles and its robotaxi. And that would mean meeting grand claims from a man and company that have often fallen short of their promises.

Tesla critics say that the stock has become grossly overvalued because of Wall Street’s willingness to buy into Musk’s vision of the future in terms of AI, self-driving vehicles and robots, despite its failures to deliver on past promises along those lines.

Tesla is facing growing competition from Chinese EV makers. BYD, one of those Chinese automakers, is poised to pass Tesla for the most EV sales worldwide, even though it is not available for sale in the United States.

Tesla also faces competition from other companies that are ahead of it in providing robotaxi services, including Waymo, the autonomous vehicle unit of Google parent Alphabet, which has its own service and has partnered with Uber in some cities.

And a change in US law is about to remove a $7,500 tax credit for buyers of most electric vehicles, which could cause prices and sales of those vehicles to fall sharply.

US law also recently removed the billions of dollars in penalties that traditional automakers have had to pay if their gas-powered vehicles exceed emissions rules. The way that they avoided those payments in the past was by buying regulatory credits from an EV maker like Tesla. But the payments that brought billions in revenue to Tesla will now vanish.

Pundits say that Tesla’s stock price is therefore unlikely to hit the ambitious targets laid out in this Musk pay package.