Elon Musk, already the richest person in the world, is poised to potentially become the first trillionaire, following the announcement of a significant new pay package by the Tesla board. The package is designed to keep Musk focused on leading the electric vehicle (EV) manufacturer.
The proposed package involves granting Musk additional shares of Tesla stock, contingent upon the company achieving substantial growth and exceeding current market capitalization records. Musk’s previous compensation plan, which contributed significantly to his wealth, also included ambitious growth targets that were initially perceived as challenging but were subsequently surpassed by Tesla.
Under the new plan, Musk could receive 423.7 million additional Tesla shares, currently valued at $143.5 billion.
However, these shares are tied to significant increases in Tesla’s stock value over the coming years. To receive all the shares, Tesla’s overall value would need to reach $8.5 trillion, considerably higher than its current market capitalization of $1.1 trillion.
If Tesla meets these increased valuation targets, the 423.7 million shares would be worth approximately $1 trillion.
Achieving an $8.5 trillion market capitalization would make Tesla the most valuable company ever, surpassing Nvidia (NVDA), the current market leader, by roughly double its value. Tesla is already the top automaker in terms of valuation, despite selling fewer vehicles and generating lower profits than legacy automakers like Toyota.
The proxy statement outlining Musk’s payment plan also includes a shareholder proposal for Tesla to acquire a stake in xAI, Musk’s privately-held artificial intelligence company. This move could further consolidate Musk’s expanding business holdings.
XAI recently acquired X, formerly known as Twitter, which Musk purchased in 2022 for $44 billion. Tesla has not expressed a position on the shareholder proposal, which lacks details regarding the size and price of the potential xAI stake.
However, any investment could further benefit Tesla, given Musk’s ownership of xAI.
Musk currently holds 410 million Tesla shares, valued at $139 billion as of Thursday’s closing price. Combined with his stakes in xAI, SpaceX, and other ventures, his net worth is estimated at $378 billion, making him the world’s richest individual, according to Bloomberg’s billionaire tracker.
He also possesses options to purchase an additional 304 million Tesla shares, although a Delaware judge has twice invalidated the 2018 pay package granting these options. Despite overwhelming shareholder approval, Tesla has attempted to reinstate those options this year. Including these options, Musk currently controls 18% of Tesla’s shares.
Tesla’s stock value nearly doubled between Election Day and mid-December 2024, fueled by investor expectations that Musk’s ties to President Donald Trump would benefit the company. However, subsequent protests, declining sales, and falling profits resulting from these connections (prior to a falling out with Trump) led to significant stock losses. While the shares have partially recovered, they remain 26% below their December peak.
Despite these challenges, Musk and his supporters maintain that Tesla is well-positioned for future growth and success. He continues to promote his plans for self-driving cars, including a robotaxi service, which he believes will generate substantial profits and value for shareholders. The robotaxis would provide transportation services and allow Tesla owners to rent out their vehicles for autonomous rides.
Musk has also announced plans for a line of humanoid robots, which he predicts could surpass Tesla’s car business in terms of sales.
“It’s a big pay package, but Tesla needs to keep its biggest asset in Musk as CEO,” Wedbush Securities analyst Dan Ives told CNN on Friday. Ives is a prominent Tesla bull on Wall Street.
“In this AI era, Musk will now drive its next leg of growth,” Ives added. “The Board had a $1 trillion dollar decision and made the right one.”
The board’s proxy statement emphasized the importance of keeping Musk focused on Tesla. In addition to his business interests, he remains active in politics, despite his dispute with President Trump, and has announced plans to form a third political party.
Tesla warned in its proxy statement that it needed to incentivize Musk to prioritize the company’s growth. During pay package negotiations, “Musk also raised the possibility that he may pursue other interests that may afford him greater influence if he did not receive such assurances.”
The board “believes that Mr. Musk singularly possesses the leadership characteristics necessary to transform Tesla and realize its long-term mission at an unparalleled level.”
However, the company is also preparing for a future without Elon Musk and is developing succession plans. One of the conditions Musk must meet to receive the final 70 million shares is “developed a framework for Chief Executive Officer succession.”
“The board regularly discusses management succession planning and leadership development,” the proxy statement noted, encompassing both “sudden, unanticipated events, in addition to longer-term planned succession for its executives.” The company “believes that management has developed a robust pipeline of seasoned leadership talent within Tesla” and is also evaluating external candidates.
Musk does not receive a cash salary from Tesla; his compensation consists entirely of Tesla shares and options. Due to the ongoing court challenge regarding the 304 million options, Musk has not received any compensation since the last disbursement of options from a 2012 pay package in 2017.
Not all tech billionaires receive additional stock options or grants as compensation. Some, like Amazon founder Jeff Bezos and Meta’s Mark Zuckerberg, benefit from the increasing valuations of their existing stakes. Both individuals acquired substantial stakes as founders, but neither has received stock grants or options since their companies’ IPOs in 1997 and 2012, respectively.
Musk’s demand for more Tesla shares
Musk has stated that it is crucial he controls at least 25% of Tesla shares.
“I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned,” Musk wrote in a post on X. “Unless that is the case, I would prefer to build products outside of Tesla.”
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