Elon Musk: Tesla boss will collect record income in 2022 because of stock options

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Richest man in the world: Elon Musk

writes (success) history with Tesla

Photo: MICHELE TANTUSSI / REUTERS

The year didn't start well for Tesla's shareholders. The paper of the electric car manufacturer from California has already lost almost 15 percent in value since the beginning of the year. A Tesla share currently costs around $920 on the Nasdaq technology exchange in New York. From its previous record price of around $1230, which was reached in November 2021, Tesla shares have come a long way again.

CEO

(50) is also affected by the development: the richest person in the world and Tesla co-founder holds, among other things, a large package of shares in the company, whose headquarters were relocated to Austin, Texas at the end of 2021. Aside from stock options, Musk currently holds a total of around 178 million Tesla shares out of a total of around 1 billion, according to CNN. According to the financial information service Bloomberg, Musk's wealth fell by more than $30 billion in January this year to currently around $237 billion. However, the entrepreneur is still at the top of the global ranking of the richest by a wide margin. Amazon founder

(58), who has a lovingly nurtured arch rivalry with Musk,

is in second place with around $165 billion .

However, this is only a snapshot.

If 2022 is settled at the end of the year, Musk's financial record should be significantly better.

There is even evidence that, in terms of his private fortune, it will be the most successful year that the Tesla co-founder and boss has ever experienced.

The background is the compensation package that Musk negotiated with Tesla back in 2018.

Analysts expect Musk to pocket many billions of dollars worth of stock options later this year as a result of this package and the automaker's results.

Background: Musk does not receive a fixed salary or other cash benefits from Tesla.

Instead, under the 2018 agreement, he will be granted stock options tied to certain financial and market valuation targets that Tesla must meet.

The cash register rings at Musk

As the US broadcaster CNN reports, Musk originally had 101 million shares in view, divided into twelve equal tranches of 8.4 million shares each.

Musk has already been allocated 59 million of these shares (or the options on the paper) because Tesla has passed the milestones in question in recent years.

According to analysts, Tesla will achieve the remaining five financial targets later this year, according to CNN.

Musk will receive four more of the stock option tranches later this year, plus one in 2023 once fourth-quarter 2022 results are in place.

That means: For Elon Musk, the cash register should ring in the coming months, at least on paper.

Each of the approximately 42 million remaining stock options gives the Tesla boss the right to purchase one share of his company at a price of $70.01.

At the current price of around $920, the package has a total value of around $36 billion.

According to the CNN report, Musk will already qualify for one or two of the five tranches when the company presents its results for the fourth quarter of 2021 this Wednesday.

From a tax point of view, Elon Musk's stock remuneration is also attractive from the Tesla boss's point of view, because initially there are no taxes at all. Only when Musk exercises the options will taxes be due on the purchases, according to CNN. Musk will therefore probably - as before - wait until shortly before the options expire with the share purchase. That would be in the years 2027/2028. At least that's how he behaved last year when he exercised 22.9 million stock options that would have expired in August 2022. As a result, Musk received a record $11 billion tax bill.

Musk also wonders how the Tesla share price will develop in the future. Like other growth and technology stocks, the paper was euphorically hyped on the stock exchange for years and reached its record price of around 1230 dollars in November 2021. Since then, however, the air on the stock market for tech stocks such as Tesla, Amazon or Apple has become rougher. Investors are looking nervously at rising inflation figures and the countermeasures announced by the central banks. The US Federal Reserve, for example, is expected to announce the first of several rate hikes this year this Wednesday.

In this environment, investors tend to ignore comparatively risky growth and tech stocks such as Tesla and prefer to reach for established companies with stable cash flows.

Prominent companies that have also experienced this change of heart in the form of sensitive price losses are former winners of the Corona crisis such as Biontech, Netflix or Delivery Hero.

However, the majority of analysts are still optimistic about Tesla shares.

According to Refinitiv, 18 analysts observed by the analysis firm are currently recommending buying or at least holding the Tesla paper.

Only ten analysts, on the other hand, rate Tesla as a “sell” or “strong sell”.

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