However, if he succeeds he could get one of the biggest windfalls ever received by a chief executive – almost $70bn, though this assumes the company does not issue more shares or raise equity.
At today’s prices, the award is worth about $7.2bn, on top of the almost 20pc stake in the business must already holds.
The award really, really, isn’t worth $7.2 billion at today’s prices.
No, really, it isn’t.
For each of the total of 12 milestones achieved, Mr Musk will see stock options vest equal to 1pc of Tesla’s outstanding shares – about 1.7m shares at the moment. At the current share price of $351, each milestone is worth almost $600m.
If Mr Musk hits all the targets, he is in line for more than $7bn, calculated against Tesla’s current share price.
20pc stake in the business must already holds.
which the company is trudging to build in sufficient quantities.
I rather like that second typo but still. Much more important is the misunderstanding of the plan itself.
Stock awards are taxed. An award of $7 billion would attract tax of $1.4 billion (capital gains) or $2.8 billion (income, both -ish figures). The tax is payable at the time of the award of the value, whatever it is. If Tesla has just awarded Musk $7 billion then one of those two tax bills is due.
For example, an option award (which they say this is) needs to be at current share prices. If there’s a discount to current market then that’s an income which has been paid to the recipient (this is what did in Steve Jobs, recall, backdating options prices?), an income upon which tax is due. Now (OK, this tax year).
Tesla really haven’t just stuck Musk with a billions $ tax bill. Therefore the deal isn’t worth $7 billion today.
If only the people writing the newspapers knew things, eh?