Tesla shareholders will decide whether to give CEO Elon Musk a stock award that could be worth up to $1 trillion. But another proposal is up for a vote to refill Tesla’s employee stock option pool, and it’s only necessary because that pool was drained to give Musk a payday larger than any other CEO in the history of the world.
One of the questions being asked on Thursday is whether or not to refill Tesla’s “general share reserve” of shares set aside to be granted to employees as compensation. This is known as “Proposal 3” – the $1 trillion award is Proposal 4.
Proposal 3 not only fills the general share reserve with 60 million shares as compensation for Tesla’s current and future employees (of which the company currently numbers ~120,000 strong), but also fills a “special share reserve” with nearly 208 million shares for one single part-time employee, Elon Musk, who mostly focuses on companies other than Tesla (and whose interests can be directly opposed to Tesla’s).
Tesla has used shares as an important part of its compensation packages for employees throughout its history, so if it is unable to pay employees in shares, it will have a harder time attracting talent. But it can’t do so anymore, because the reserve has been drained.
Well, isn’t Elon the drive force behind Tesla. He deserves all the upside of Tesla stock. Correcto?
And even if proposal 4 is voted down, if proposal 3 passes, the board could still give Musk $97 billion worth of stock, and it’s holding employees’ compensation hostage to ensure that it be able to do so.
Regarding this fund, what is not clear to me is how it will be filled - either from buybacks or by dilution. My guess is by dilution since this is not being positioned as a buyback (which many shareholders would find benefit from the concentration of stock value).
drained Tesla’s employee share pool for himself alone
As if this pool is limited by some celestial force. I have no problem with people disagreeing with the proposed pay package, a vote will decide the outcome. What is BS is the crap people post.
People like Warren Buffett hate stock options because they dilute his holdings. I’m fine with that, it’s fair position for Warren Buffett. I like stock options for growth companies because it protects their cash flow as well as aligning the workers with the company’s objectives.
I never heard anyone object to Microsoft stock options that created lots of millionaires but Tesla is a target of US hate. BTW, I now see Teslas with the light bar. Portugal does not seem to hate Tesla.
Stock based compensation and some associated dilution is SOP in the US tech industry. However the amount of dilution associated with Props 3 and 4 is an extreme outlier. Both passed, and at maximum value they will dilute the company’s stock by 16.5%, with over 90% going to one employee: Elon Musk.
Assuming the maximum value of Props 3 & 4 are realized, the number of Tesla shares will have increased by 162.64% since IPO.
I couldn’t easily find numbers for Microsoft, but for comparison’s sake, the number of Alphabet shares has increased by about 19% since IPO (after accounting for splits). Founders Sergy Brin and Larry Page have received zero new shares since IPO. None of the Microsoft founders ever got stock grants post-IPO either.
So this is correctly viewed as an extreme outlier and not typical of SBC in the US tech industry at all.
If the number of shares doubles and the stock price doubles I’m up how much?
1,000,000 shares at $100 each
2,000,000 shares at $200 each
My 100 shares go from $10,000 to $20,000
100%? Did I get the math right this time?
There is a difference between company book value, a metric Warren Buffett loves, and share price. You can’t buy TSLA at book value! As I mentioned elsewhere there might be a connection but there is no correlation.
A lot of stock market lore is still based on the Financial Bible of 1934
“First published in 1934, Security Analysis is one of the most influential financial books ever written. Selling more than one million copies through five editions, it has provided generations of investors with the timeless value investing philosophy and techniques of Benjamin Graham and David L. Dodd. As relevant today as when they first appeared nearly 75 years ago, the teachings of Benjamin Graham, “the father of value investing,” have withstood the test of time across a wide diversity of market conditions, countries, and asset classes.”
I have the 1934 edition and I must have read it at least five times. Back then bonds were investing and stocks were speculation. Much has changed in almost a century. In the economy the biggest innovation might be “Increasing Returns” where value cannot be calculated the same way the value of bonds is calculated even though the “Discounted Present Value” is valid for both. With bonds you have all the data, expiration date, interest rate, etc. With stocks you have GIGO, just guesstimates and to be safe the guesstimates under report the benefits and over report the risks.
Already in 1924 Edgar Lawrence Smith showed that stocks were better investment than bonds and Benjamin Graham accused Smith of fueling the 1929 stock market crash.
I don’t agree with this. Much of everything he claims credit for is off the backs of others. Sure, he makes some changes but he is not a creator of very much.
He has been put on this pedestal that I don’t understand. He didn’t found Tesla, he bought an existing company that had already started to electrify transportation. He had a ton of talented people under him who were instrumental in the success. Then the guy, at some point, went mad. For all the good he did early on its been a series of mistakes since. Failed CyberTruck. Semi truck still not in production. Optimus is years behind the competition, and I’m sorry but “every house hold will” NOT “want one”. Roadster 2.0, affordable Telsa, drive from NYC to LA. All failures. And yet some still think the guy is worth $1T. The magic is gone.
