Last week, Tesla's board of directors proposed awarding CEO Elon Musk the largest compensation package in US corporate history. Musk could receive up to 12% of Tesla's shares if he helps the electric vehicle company achieve a market capitalization of $8.6 trillion in the next 10 years. This means their market cap would have to increase almost eight times its current value. At that point, Musk's 12% stake would be worth $1.03 trillion.
In a newly released document, Tesla explained that it needs to compete with Musk's private companies. The electric car maker stated that the billionaire's other ventures, primarily aerospace company SpaceX and AI startup xAI, now contribute a significant portion of his wealth. Therefore, if Tesla doesn't offer higher compensation, Musk might focus on these other companies.
"A large percentage of Mr. Musk's wealth is now attributable to ownership in entities other than Tesla. He has more compelling alternative options than ever before," the company stated. Thus, the 423 million share compensation package is necessary to prevent the Tesla CEO from "prioritizing other companies".
However, this package still requires approval from the American automaker's shareholders at a November meeting. A special committee of independent board members is currently reviewing the proposal.
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Billionaire Elon Musk at the Oval Office in the White House, 30/5. Photo: AFP |
Billionaire Elon Musk at the Oval Office in the White House, 30/5. Photo: AFP
As of last year, analysts believed that most of Musk's wealth still came from Tesla stock. The Bloomberg Billionaires Index estimates the Tesla CEO's current net worth at $399 billion, while Forbes puts it at $447 billion.
This discrepancy likely stems from a controversial 2018 compensation package, valued at $60-100 billion. Last year, a Delaware court twice ruled against this package, deeming it "unfair to shareholders." Tesla is currently appealing the decision.
Currently, Tesla stock contributes less than half of Musk's wealth. The billionaire owns 13% of the electric car company, equivalent to $140 billion. He has stated he needs at least 25% voting power to prevent a hostile takeover as the company shifts its focus towards robotics and artificial intelligence technology.
At SpaceX and xAI, he holds greater power. Musk owns 42% of SpaceX and has a large stake in xAI. SpaceX plans to issue more shares, potentially valuing the company at $400 billion – almost double last year’s valuation. At this level, Musk's stake would be worth $170 billion – exceeding the value of his Tesla shares.
Similarly, xAI is experiencing rapid growth. Earlier this year, the AI startup was valued at $80 billion, later increasing to $200 billion in its latest funding round. Musk currently owns over 50% of the company, representing assets over $100 billion.
In total, his stakes in these two companies alone are worth double his Tesla holdings. This excludes his leadership roles at neurotechnology company Elon Musk Neuralink, social media platform X, and tunneling company The Boring Company.
Elon Musk plays an irreplaceable role at Tesla, especially as the company navigates a pivotal period. He transformed Tesla from a startup into the world's most valuable car company, scaling production, expanding globally, and propelling the electric vehicle industry forward. For years, the billionaire has also been considered the face of the company.
Ha Thu (via CNBC, Reuters)
