The stock market, volatile and now driven more by machine trading (algorithms) than hands-on human decision-making, is saying Tesla Inc. has won. The endgame is nigh, apparently. And the endlessly arrogant, astonishingly abrasive and spectacularly successful CEO Elon Musk is growing richer by the day.

That Tesla should be worth about $145 billion (all figures in US dollars) today, with a market capitalization three times the combined value of Ford Motor and General Motors, says everything about how out of whack the financial markets are in 2020. The markets don’t reflect the economy with massive unemployment and deep uncertainty. Similarly, Tesla’s value is a variation on an old Wall Street saw: buy the rumour, sell the result.

In the broadest sense, Tesla is rumoured to be a world-dominating EV (electric vehicle) company, though actual financial results are unimpressive — given how shareholders value Tesla. For the moment, investors are saying they think the efforts of legacy carmakers such as Volkswagen AG, GM, Daimler AG and Ford will lose the EV race, despite pumping billions into electrifying their fleets.

That may, indeed, prove to be the case. I’ve long been bullish about Tesla’s vehicles, but bearish about the prospects of a start-up EV maker with a manufacturing base in high-cost California run by a bragging, swaggering egomaniac.

Starting an automotive company from scratch, even if you’re a self-described genius like Musk, is unimaginably risky. Moreover, Musk has proven to the kind of corporate leader who alienates senior management with a hard-driving, mercurial style. Thus, the steady exodus from Tesla’s leadership ranks.

Yet Tesla has survived, and appears poised to survive even the global pandemic. Tesla’s venture in China seems to be working, and the company has managed there without entering into the kind of joint venture that has long hamstrung VW, GM, Daimler and BMW AG. It’s to Musk’s credit that through the force of his will and imagination and smarts, Tesla has continued to grow, though prosperity – actual ongoing profits – remains elusive.

Regardless, Musk is going to be rewarded, no matter the losses, the unpaid workers waiting to return to their Tesla jobs. As Reuters reports, Musk appears ready to realize a $750 million payday, or thereabouts. Even as Musk’s employees have found themselves on furlough or working for less, the CEO is about to realize unimaginable personal financial gain.

I am certain that Musk is convinced that he’s worth every penny. If Tesla hits a six-month market value average of $100 billion (US), he will be able to vest the first of 12 tranches of options granted in a two-year-old pay package that runs for another eight.

That is, he’ll be able to buy 1.69 million Tesla shares at $350.02 each – or less than half the current share price. Voila: a profit of $758 million. His current pay package was set in 2018, when Tesla was worth about a third of its current market valuation.

In a world of billionaires getting richer and richer as they ride out the pandemic on their yachts or in their mansions, even as middle-class workers struggle to pay the mortgage and (in the U.S.) afford health care, Musk is getting nearly a billion in bouses. Musk is about to pocket more money than anyone in the suffering global workforce can ever imagine and more than even Musk himself can surely spend.

Tomorrow, Tesla will release its quarterly report. The global demand for vehicles will be shown to have been hammered by the pandemic. The analysts and Tesla’s investors will fret about how shuttered plants and cratered sales for all automakers will have an impact on cash burn, money-losing Tesla in particular. They will parse every word Musk utters about consumer demand and the economic prospects of a world slowly, carefully emerging from an economic freeze that may yet turn into a depression.

They will want to know Musk’s projections for the Model Y sport-utility vehicle. And they will assess whether or not Tesla has met the projected revenue jump of 30 per cent, to some $5.9 billion. They will slavishly continue to excuse Tesla and Musk for failing to report financial results according to Generally Accepted Accounting Principles (GAPP), not to mention the expected non-GAPP loss Reuters suggest will be 36 cents per share.

Perhaps Tesla will one day be spectacularly profitable. At this point, it would be foolish to bet against Tesla. Musk himself will be hoping to see Tesla’s valuation grow and grow, regardless of profitability and the financial well-being of its employees.

You see, Musk’s pay package runs 10 years, with new options tranches vesting in $50-billion increments. If Tesla’s market cap hits $650 billion, he gets all his bonuses and billions more.

It remains to be seen if Tesla’s employees get a modest raise, of course.


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