I read this article and still walked away feeling like I didn’t understand the situation that well.
Is it $56 billion that he’s already been paid, and he needs to return it? $56 billion he’s partially been paid, and he can keep what he has, but won’t get the rest? Something more complicated?
From the NYTimes::
ordered Tesla to cancel stock options awarded to Mr. Musk, the electric car company’s chief executive, worth about $50 billion.
So yep. Got it. Needs to pay it back
https://web.archive.org/web/20240131213214/https://www.nytimes.com/2024/01/31/business/tesla-elon-musk-pay-package.html
Your article says:
What are options? Does this mean he didn’t receive this compensation yet, and now he simply won’t receive it, assuming the company doesn’t appeal or move states like the article mentions? It says he had the option to buy 304 million shares - I assume he can buy them at a deep, deep discount compared to their current price?
It’s a form of contract that allows (but does not obligate) a person to buy X amount of shares for Y price in the future, regardless of the going rate at the time.
It means he hasn’t executed on those options yet - he hasn’t yet bought those stocks at the price agreed.
So since he hasn’t executed on the options, there’s nothing he has to actually pay back, but he also won’t be allowed to exercise those options and purchase what would have been $56 billion worth of dirt cheap stocks?
I also assume that calculations of his net worth did take the options into account, so assuming the order stands, it’s effectively an immediate $56 billion hit to those calculations?
Yes. Options have expiry dates. Him letting the options expire cuts off those cheap stocks for him.
Net worth calculations take all known assets into account, this includes options. Naturally the options are completely worthless now.
Thanks. Do you happen to know why he wouldn’t have executed the options before this suit? Like you mention they expire - surely he never had any intention of letting them expire though? Was there some benefit to waiting them out?
It’s Elon. There are a wealth of possible reasons, ranging from actually reasonable to ‘it sounded better in my head’. Elon can be kinda erratic in his judgement sometimes.
One possibility is that he may have been attempting his usual market manipulation shenanigans; he is quite blatant about using his cult of personality for this. Wherever he publicly goes in the market, he is followed by millions of worshipping fanboys. They raise the price, he executes, pretty much instant profit right there.
He could also be thinking the price would plummet below the contract price (or that he could make it do so then raise it again).
Or maybe he didn’t like the fact that he’d have to hold them for 5 years before being able to do what he wanted with. Elon is not known to simply abide by trading regulations.
Maybe he wanted a tax write off?
Or he could have simply forgot.
The only real benefit to Elon is that he didn’t have to pay out for shares he was no longer interested in buying, even if he did make a bit of a loss with the options.
Thanks for the speculation. It still seems a bit odd, especially considering he’s asked the board to give him a 25% stake in the company recently.
I wonder if he did anything like back loans with those options, and if he did, what the consequences would be now that he’s not going to have them anymore?