Investor's Corner
Tesla at $420 is a bargain considering its Autopilot data is key to a self-driving future
Questions continue to swirl around the fate of Tesla stock (NASDAQ:TSLA) as the market waits for updates about Elon Musk’s initiative to make the company private. Tesla’s privatization, provided that it does go through, will be the largest one in history, amounting to around $70 billion at Musk’s target of $420 per share. While this amount is substantial, $420 is actually a pretty good deal for Tesla’s would-be funding partners, considering the volume of Autopilot data the company has gathered from its Model S, Model X and Model 3 fleet.
Tesla’s possible privatization has caused wild swings in Tesla’s stock price, though not too far a departure from its usual volatility. Upon Musk’s announcement, shares climbed up 11%, before falling back as reservations emerged from critics about the plausibility of the company’s privatization. On Thursday’s after-hours, Tesla stock recovered some of its losses as the company’s board of directors issued a statement stating that they would formally review Musk’s plans.
Gene Munster, Managing Partner at Loup Ventures believes that there is more than a 50% chance that Tesla would become a private company. Munster noted that while concerns about the possible repercussions of Musk’s go-private Twitter announcement might affect the stock, the effects would only be felt at the very short-term. Ultimately, the venture capital firm believes that neither Tesla nor Elon Musk is at legal risk, especially since the company stated on a 2013 Form 8-K that social media might be used as an outlet for disseminating company information. Loup Ventures also estimates that Tesla would need around $25-$30 billion to take the electric car and energy company private.
If Loup Ventures’ calculations prove accurate, the entities providing the company with the funding to go private would be getting quite a deal at $420 per share. Apart from Tesla’s electric car and energy business — both of which are growing at an immense rate — investors would also be buying into a company that holds what could very well be automotive world’s most extensive amount of real-world driving data. As of July, a report from MIT’s Lex Fridman estimated that Tesla had acquired around 1.2 billion miles on Autopilot and approximately 7.8 billion miles in Autopilot “Shadow Mode.”
In comparison, Waymo’s fleet of vehicles have driven a total of 5 million real-world miles in self-driving mode and an additional 5 billion miles in simulation as of May this year. GM Cruise, another leader in self-driving technology, does not release the numbers of its fleet, but accident and disengagement reports based on autonomous miles driven provide a rough estimate of the miles Cruise’s vehicles have traveled so far. Between June 2015 and November 2017, the California Department of Motor Vehicles estimated that GM Cruise’s self-driving cars covered a total of 141,691 miles in CA. Morgan Stanley analyst Adam Jonas estimates Waymo to be worth $175 billion. GM Cruise, on the other hand, is valued at $11.5 billion after securing more funding from Softbank’s Vision Fund earlier this year.
Tesla’s development of self-driving technologies has taken a backseat in the media coverage of the company, particularly during the past year as the company struggled with the Model 3 ramp. Regardless of this, Keith Wright, a professor from Villanova University, notes that Elon Musk’s decision to invest heavily in AI would likely pay off soon. Among the participants in the self-driving race, Tesla is the company with the most real-world experience. Elon Musk once noted that it would likely take around 6 billion real-world miles before regulators would approve self-driving technology. So far, Tesla is the company closest to that mark.
Tesla’s focus on data gathered from real-world miles was emphasized by Nidhi Kalra, a senior information scientist for the RAND Corporation, a nonprofit research organization. According to the information scientist, simulations such as the ones used by Waymo to train its fleet of autonomous vehicles are a “simplification” of the real world.
“The problem with any simulator is that it’s a simplification of the real world. Even if it stimulates the world accurately, if all you’re simulating is a sunny day in Mountain View with no traffic, then what is the value of doing a billion miles on the same cul-de-sac in Mountain View? I’m not saying that’s what anyone’s doing but without that information we can’t know what a billion miles really means. Real-world miles still really, really matter. That’s where, literally, the rubber meets the road, and there’s no substitute for it,” Kalra said.
And Tesla is just getting started. In Tesla’s Q2 2018 earnings call, the company provided an update on its efforts to develop its own self-driving hardware. According to Pete Bannon, who leads the development of Hardware 3, the company’s new hardware is different from the industry standard.
“We did a survey of all of the solutions that were out there for running neural networks, including GPUs. We went and talked to other people like at ARM that were building embedded solutions for running neural networks. And pretty much everywhere we looked, if somebody had a hammer, whether it was a CPU or a GPU or whatever, they were adding something to accelerate neural networks. But nobody was doing a bottoms-up design from scratch, which is what we elected to do.”
“We had the benefit of having the insight into seeing what Tesla’s neural networks looked like back then and having projections of what they would look like into the future, and we were able to leverage all of that knowledge and our willingness to totally commit to that style of computing to produce a design that’s dramatically more efficient and has dramatically more performance than what you can buy today.”
Tesla could very well be approaching its most significant turning point in years. Regardless of whether Tesla becomes private or not, one thing seems sure — once Tesla starts rolling out its first full self-driving features, and once Hardware 3 makes it to the company’s fleet, leaders in the self-driving industry would probably be forced to recognize the presence of a new, possibly dominant player.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
Elon Musk
Tesla board reveals reasoning for CEO Elon Musk’s new $1 trillion pay package
“Yes, you read that correctly: in 2018, Elon had to grow Tesla by billions; in 2025, he has to grow Tesla by trillions — to be exact, he must create nearly $7.5 trillion in value for shareholders for him to receive the full award.”
Tesla’s Board of Directors has proposed a new pay package for company CEO Elon Musk that would result in $1 trillion in stock offerings if he is able to meet several lofty performance targets.
Musk, who has not been meaningfully compensated since 2017, completed his last pay package by delivering billions in shareholder value through a variety of performance-based “tranches,” which were met and resulted in the award of billions in stock.
Elon Musk’s new pay plan ties trillionaire status to Tesla’s $8.5 trillion valuation
However, Musk was unable to claim this award due to a ruling by the Delaware Chancery Court, which deemed the payout an “unfathomable sum.”
Now, the company is taking steps to ensure Musk gets paid, as the Board feels that it is crucial to retain its CEO, who has been responsible for much of the company’s success.
This is not a statement to undermine the work of all of Tesla’s terrific employees, but a ship needs to be captained by someone, and Musk has proven he is the right person for the job.
The Board also believes that, based on a statement made by the company in its proxy, various issues will be discussed during the upcoming Shareholder Meeting.
Robyn Denholm and Kathleen Wilson-Thompson recognized Musk’s contributions in a statement, which encouraged shareholders to vote to approve the payout:
“We’re asking you to approve the 2025 CEO Performance Award. In designing the new performance award, we explored numerous alternatives. Ultimately, the new award aims to build upon the success of the 2018 CEO Performance Award framework, which ensure that Elon was only paid for the performance delivered and incentivized to guide Tesla through a period of meteoric growth. The 2025 CEO Performance Award similarly challegnes Elon to again meet a series of even more aspirational goals, including operational milestones focused on reaching Adjusted EBITDA targets (thresholds that are up to 28 times higher than the 2108 CEO Performance Award’s top Adjusted EBITDA milestone) and rolling out new or expanded product offerings (including 1 million Robotaxis in commercial operation and delivery of 1 million AI Bots), all while growing the company’s market capitalization by trillions of dollars.
Yes, you read that correctly: in 2018, Elon had to grow Tesla by billions; in 2025, he has to grow Tesla by trillions — to be exact, he must create nearly $7.5 trillion in value for shareholders for him to receive the full award.
In addition to these unprecedented performance milestones, the 2025 CEO Performance Award also includes innovative structural features, born out of the special committee’s considered analysis and extensive shareholder feedback. These features include supercharged retention (at least seven and a half years and up to 10 years to vest in the full award), structural protections to minimize stock price volatility due to administration of this award and, thereafter, incentives for Elon to participate in the Board’s continued development of a framework for long-term CEO Succession. If Elon achieves all the performance milestones under this principle-based 2025 CEO Performance Award, his leadership will propel Tesla to become the most valuable company in history.”
Musk will have a lot of things to accomplish to receive the 423,743,904 shares, which are divided into 12 tranches.
However, the Board feels he is the right person for the job, and they want him to remain the CEO. This package should ensure that he stays with Tesla, as long as shareholders feel the same way.
Investor's Corner
Elon Musk’s new pay plan ties trillionaire status to Tesla’s $8.5 trillion valuation
Shareholders are expected to vote on the proposal at the annual meeting on November 6.
Tesla’s board has proposed a new compensation package for CEO Elon Musk that could make him the world’s first trillionaire and Tesla the most valuable company in history.
The 2025 CEO Performance Award, outlined in a securities filing on Friday, would be worth up to $900 billion in Tesla stock (NASDAQ:TSLA) if the automaker achieves a series of aggressive performance and valuation goals, according to the New York Times.
Shareholders are expected to vote on the proposal at the annual meeting on November 6.
Tesla is aiming for an insane $8.5 trillion market cap
The package requires Musk to lift Tesla’s market capitalization from about $1.1 trillion today to $8.5 trillion over the next decade. At that level, Tesla would surpass every major public company in existence. Nvidia, currently the world’s most valuable firm, has a market cap of around $4.2 trillion today, as noted in a Motley Fool report. Microsoft and Apple follow at $3.8 and 3.6 trillion each, while Saudi Aramco is valued at around $1.5 trillion.
If Tesla achieves its $8.5 trillion target, it would be worth more than twice Nvidia’s present valuation and nearly eight times its current size. The compensation plan also requires Tesla’s operating profit to grow from $17 billion last year to $400 billion annually.
Elon Musk’s path to a trillionaire status
Apart from leading Tesla to become the world’s biggest company in history, Musk is also required to hit several product targets for the electric vehicle maker. These include the delivery of 20 million Tesla vehicles cumulatively, 10 million active FSD subscriptions, 1 million Tesla bots delivered, and 1 million Robotaxis in operation.
Tesla board chair Robyn Denholm and director Kathleen Wilson-Thompson said retaining Musk is “fundamental to Tesla achieving these goals and becoming the most valuable company in history.” If successful, the plan would raise Musk’s Tesla stake from 13% to about 25%, further consolidating his control. It would also result in the CEO earning $900 billion in TSLA stock, allowing him to effectvely become a trillionaire.
The proposal mirrors a 2018 compensation plan that was invalidated in Delaware court earlier this year in the way that it is focused on very aggressive targets and operational milestones. Tesla has since shifted its corporate registration to Texas, where challenges from potential activist shareholders are less of a risk.
Tesla’s SEC filing can be viewed below.
www-sec-gov-Archives-edgar-data-1318605-000110465925087598-tm252289-4_pre14a-htm… by Simon Alvarez
Investor's Corner
Shareholder group urges Nasdaq probe into Elon Musk’s Tesla 2025 CEO Interim Award
The SOC Investment Group represents pension funds tied to more than two million union members, many of whom hold shares in TSLA.
An investment group is urging Nasdaq to investigate Tesla (NASDAQ:TSLA) over its recent $29 billion equity award for CEO Elon Musk.
The SOC Investment Group, which represents pension funds tied to more than two million union members—many of whom hold shares in TSLA—sent a letter to the exchange citing “serious concerns” that the package sidestepped shareholder approval and violated compensation rules.
Concerns over Tesla’s 2025 CEO Interim Award
In its August 19 letter to Nasdaq enforcement chief Erik Wittman, SOC alleged that Tesla’s board improperly granted Musk a “2025 CEO Interim Award” under the company’s 2019 Equity Incentive Plan. That plan, the group noted, explicitly excluded Musk when it was approved by shareholders. SOC argued that the new equity grant effectively expanded the plan to cover Musk, a material change that should have required a shareholder vote under Nasdaq rules.
The $29 billion package was designed to replace Musk’s overturned $56 billion award from 2018, which the Delaware Chancery Court struck down, prompting Tesla to file an appeal to the Delaware Supreme Court. The interim award contains restrictions: Musk must remain in a leadership role until August 2027, and vested shares cannot be sold until 2030, as per a Yahoo Finance report.
Even so, critics such as SOC have argued that the plan does not have of performance targets, calling it a “fog-the-mirror” award. This means that “If you’re around and have enough breath left in you to fog the mirror, you get them,” stated Brian Dunn, the director of the Institute for Comprehension Studies at Cornell University.
SOC’s Tesla concerns beyond Elon Musk
SOC’s concerns extend beyond the mechanics of Musk’s pay. The group has long questioned the independence of Tesla’s board, opposing the reelection of directors such as Kimbal Musk and James Murdoch. It has also urged regulators to review Tesla’s governance practices, including past proposals to shrink the board.
SOC has also joined initiatives calling for Tesla to adopt comprehensive labor rights policies, including noninterference with worker organizing and compliance with global labor standards. The investment group has also been involved in webinars and resolutions highlighting the risks related to Tesla’s approach to unions, as well as labor issues across several countries.
Tesla has not yet publicly responded to SOC’s latest letter, nor to requests for comment.
The SOC’s letter can be viewed below.
Tesla board reveals reasoning for CEO Elon Musk’s new $1 trillion pay package
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