Elon Musk’s next big payday is approaching

CEO Elon Musk does not receive any cash salary or bonuses. He is paid only with stock options. But he has nearly exhausted the options available from the compensation package he received from Tesla in 2018a package that turned out to be the highest-grossing stock option package issued by any company., according to Courtney Yu, director of research at executive compensation company Equilar.

The 93.9 million options Musk has received so far from this package were worth $86.8 billion at Friday’s close, including the strike price.

Just last week, Musk received 25.3 million of these options due to Tesla’s record earnings posted on Wednesday. It is likely to get another 8.4 million options shortly, likely after the company releases second or third quarter results based on analyst earnings forecasts for the company.

But those 8.4 million billion-dollar options are a relatively small fraction of what Musk could end up with. Once he receives these additional options, he will receive all 101 million split-adjusted options that were part of this 2018 pay package. The question should be whether he gets even more options, perhaps tens of millions more options.

Musk sidestepped the question of such a payday during a call to investors on Wednesday, simply saying, “There are currently no negotiations underway for additional compensation for me.”

But that doesn’t mean he won’t be offered that kind of salary in the future.

Not all technology leaders have options

Some tech billionaires do just fine without stock options.

Amazon (AMZN) founder Jeff Bezos, who is the second richest person in the world (net worth about $100 billion less than Musk, and facebook (FB) founder Mark Zuckerberg has not received grants or stock options since their companies’ initial public offerings in 1997 and 2012, respectively. They also didn’t earn much in terms of wages. Bezos earned $81,000 a year while he was CEO, while Zuckerberg made $1 a year for most of the last decade.

They have profited from a significant appreciation in the value of the shares they have owned since their companies went public.

Most of Musk’s net worth is estimated at $270 billion, comes from Tesla stock valuation. But he has also regularly received stock options in compensation since 2009, the year before the company’s IPO.

He exercised many of these options as they were due to expire. Virtually all of his remaining options come from his Compensation package 2018

Wall Street wants more Musk options

Many analysts believe it’s only a matter of time before Tesla offers another option package for Musk.

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

And 81% of Tesla shareholders who voted for Musk’s pay package in 2018 approved of it. Other analysts believe the new package will benefit both the company and Musk.

“Eventually the board of directors will reset Elon’s plan. And this plan will be as massive as the previous one,” said Gene Munster, managing partner of Loup Ventures. “Elon thinks big and he has huge new markets he can go into and build big businesses, including autonomy and robots.”

Is there a downside to public relations in providing the world’s richest man with additional opportunities that could add tens, if not hundreds of billions, to his wealth?

“Elon is the richest man in the world, and he can still appeal to hard-working people,” Mansger said. “Those people would pretty much cheer him up with a huge new rewards package.”

A new option package for Musk could do a lot to convince investors who are worried that he might lose interest in Tesla because of his position as CEO at SpaceX or his interest in buying and transforming Twitter.

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

Does Musk need extra power to take care of Tesla?

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

“He’s already financially committed to seeing Tesla continue to do well,” Equilar’s Yu said.

But proponents of the new package say it will answer many doubts about Musk’s focus that have been raised since he announced his purchase plans. Twitter (TVTR).

“Even though his DNA won’t change whether he gets new Tesla options or not, the street will want him to have another compensation package,” Ives said.

Tesla bears the costs associated with providing Musk with additional options, even if it is non-monetary compensation. The estimated carrying value of these options is shown as an expense on the income statement. Last year, Tesla recorded a $571 million expense related to Musk’s 2018 compensation package alone. If he doesn’t get a new one, that expense will disappear from the income statement.

And while Musk’s new package is sure to be criticized by those who think executives are being paid too much, that decision will be made by Tesla’s shareholders, and no one else.

“Musk is already either a hero or a villain in people’s eyes,” Ives said. “The new package will either make people hate it even more, or they’ll be relieved that it stays in place.”

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