It Might Feel Unfair, but Elon Musk Is Entitled to His Big Payday

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Photo: Elon Musk on X / autoevolution edit
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Six years ago, Elon Musk promised everyone that he would continue to lead Tesla for at least another 10 years. He quashed all the rumors regarding a departure from the company after the Model 3 was ready for prime time internationally. His reward for sticking around? A compensation package that was tied to Tesla's performance. The unexpected bit? He agreed to not receive a salary, cash bonuses, or shares that could be sold at any given time. Now, the man understandably wants to get paid – in stock that vests over time. Here's why he should get all those "many billions" of dollars.
At the end of 2017, Tesla had around $3.4 billion in cash and almost three times as much debt. The EV-for-the-many brought the company to the brink of bankruptcy. Tesla really wanted to start manufacturing the Model 3 and make as many units as possible, as quickly as possible. However, working with many partners and figuring out whom to pay first (and when to wire the funds) became very complicated.

Elon Musk himself admitted that at one point, the EV maker was a month away from closing up shop or being bought by a giant like Daimler or Toyota. Musk even tried to get Apple to buy Tesla because the production of the Model 3 almost destroyed the automaker. The EV that was supposed to become a hit and advance the mission of zero-tailpipe emission transportation could have easily turned into a self-designed Trojan Horse.

Still, Apple buying Tesla wasn't a wild idea. People have been suggesting the iPhone maker buy Tesla since 2014. Many believed Apple would do well in the EV sector, especially since it had a lot of money to invest in developing better products. However, Tim Cook didn't even want to meet with Elon Musk.

Considering that Musk previously referred to Apple as the "Tesla Graveyard" because it was hiring the people who the automaker let go, Cook's decision not to engage with the outspoken executive wasn't such a surprise. Still, the decision to not buy Tesla when it was at its lowest must have haunted Apple's CEO. It reportedly spent over $10 billion on Project Titan (the iCar), which is now shelved.

A deal's a deal, right?

Right as Tesla was going through a rough patch in silence, the Board and Elon Musk reached a deal: he wasn't going to get paid unless the company soared in value and other targets, such as increased revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA), were going to be achieved.

Essentially, Musk agreed to some insane conditions for a CEO. He basically said "yes" to not receiving anything if Tesla wasn't going to have a higher and higher market capitalization and reach the established revenue and adjusted EBITDA targets. All three things had to happen so Musk could get one percent of the company every time he and the Tesla team reached one of the goals.

Back then, in 2018, Tesla was worth around $58 billion. If Musk and the people working for the EV maker were to take Tesla to a market value of $100 billion, increase the revenue to about $20 billion, and take the adjusted EBITDA to $1.5 billion, then the CEO would have received one percent of the company.

However, not even in such a scenario would Elon Musk have been able to cash out because there was a mandatory vesting period of five years. That meant the CEO had to make sure that the company remained on track. Otherwise, he would have risked losing it all.

When writing, Tesla has a market capitalization of $567.7 billion (almost ten times more than what it was worth in 2018), $13.55 billion in annual EBITDA for last year, and a revenue of nearly $97 billion. So, he managed to tick the boxes the Board asked him to. The Model 3, the Model Y, the software push, the energy angle, the hype regarding certain products, and the AI avalanche helped the company evolve into a global behemoth. It is the world's most valuable automaker.

The CEO was very close to buying around 304 million shares for around $23 each because of all that success. That price was about $168 less than what a share's price was in January 2024.

Stop and rethink

Remember: he would have only been able to sell some or all of them in five years. One could say that he worked for free, but that would be an exaggeration. The man had already become a billionaire while leading Tesla and was able to buy Twitter (X) because he was at the helm of the world's most well-known EV maker.

However, a Delaware judge decided that Elon Musk didn't need almost $56 billion in shares after one stockholder decided to see if the pay package could be thrown out. The decision was a terrible blow for Elon Musk. Around that time, he publicly announced that he wanted to increase his Tesla ownership from 20.5% to around 25%. The judge's decision was a terrible pushback, one that eventually led to the decision to move Tesla from Delaware to Texas.

Tesla shareholders are once again voting to give Elon Musk what he was promised from the get-go. Many agree that he should get the 2018 deal said. However, others already explained on various platforms why their vote will be "no."

While Elon Musk's reward seems a bit over the top, it's important to keep in mind that he, the many people he hired, the tens of thousands of professionals who served Tesla well, and all the suppliers helped turn the EV maker into what it is today.

Tesla can afford to launch a product like the Cybertruck to test new technologies because it has enough cash on hand and has educated its customer base to put up with the hurdles of progress. Few other buyers are willing to be as open-minded as some Tesla customers. The same thing can be said about Full Self-Driving, too. It sounds simple, but pulling this off isn't an easy feat.

Laying off almost the entire Supercharger team was an unexpected move. Experienced executives leaving in droves is another negative. Pile on top of these things the fact that there's not much happening in favor of EVs right now, and it's easy to understand why some people might feel that Musk shouldn't be enjoying the perks he was promised six years ago.

But despite all the controversy, the wild promises, the eccentric comments, the involvement in weird online debates with strangers, the public outbursts, and the cutthroat personnel decisions, Tesla still has a ton of potential. Even though Musk put the company and its people through a lot lately, the marque is the epitome of success and can fight the imminent influx of cheap Chinese cars and tech.

A better, greener future for all

Together with the likes of Ford, Rivian, GM, and Lucid, America has a shot at avoiding the import of very cheap cars that can put a serious dent into the domestic auto industry.

It's in Musk's best interest to keep Tesla afloat and reinvent its success story. I doubt robotaxis and bots are the best way forward, but who knows what's going to work? After all, Musk proved detractors wrong on multiple occasions. He could pull it off once again.

And he has to. If he doesn't keep Tesla at a respectable value, he stands to lose more money than everyone else involved in this company's mission. Yes, he could borrow against the shares he might get after the June Shareholder Meeting to cover some debts incurred by the Twitter acquisition.

However, having all those shares won't do any good if Tesla's market value drops below the level agreed upon with the creditor and he gets the margin called. It's a tricky game, but it's one that ensures the EV maker will have a CEO who will continue to fight for the brand in the best way possible.

Love him or hate him, Elon Musk is synonymous with Tesla – for now. Even though the well-known and outspoken executive has consistently expressed intriguing views, he almost always managed to land on top of things.

For a man who is leading multiple companies and collaborating with numerous governments across the globe, Elon Musk is a great role model for those among us who want to maximize the potential of their professional career. He, as anyone who works for a living, deserves to get "paid."
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About the author: Florin Amariei
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Car shows on TV and his father's Fiat Tempra may have been Florin's early influences, but nowadays he favors different things, like the power of an F-150 Raptor. He'll never be able to ignore the shape of a Ferrari though, especially a yellow one.
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