Money Rehab with Nicole Lapin - Elon Musk Gets His $47 Billion— Here's Nicole's Hot Take

Episode Date: June 21, 2024

Tesla shareholders voted in favor of Musk receiving the historic $47 billion compensation package. Nicole's take? He deserves it. She explains.

I love hosting on Airbnb. It's a great way to bring in some extra cash. But I totally get it that it might sound overwhelming to start, or even too complicated, if, say, you want to put your summer home in Maine on Airbnb, but you live full-time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network, which is a network of high quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you.

I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host so I can still make that extra cash while also making it easy on myself. Find a co-host at airbnb.com slash host. One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with features like no

maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime feels like progress. Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A. Members FDIC. Spot me eligibility requirements and overdraft limits

apply. Boosts are available to eligible Chime members enrolled in Spot me and are subject to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details. Hey, money rehabbers, I'm going to be putting together a few totally anonymous surveys over the next couple months, and I would love to hear from you. The first one is up now at MoneyNewsNetwork.com slash survey. I would so appreciate it from the bottom of my heart if you could take a few minutes and take this survey. I promise it's short and let me know your thoughts. Thank you. Thank you. Thank you. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab.

He did it, guys. Elon Musk got his historic pay package thanks to Tesla shareholders who voted to award Elon the largest compensation package in history. And in the hierarchy of comp packages, Elon is truly in a league of his own. He's not first by hair as determined by photo finish. After Elon, the second highest paid exec is Hock Tan, CEO of Broadcom. Tan's compensation is about $161 million. I'll do the math for you. Musk is making as much money from his comp package as 290 hoctans. Some voices were extremely vocal in encouraging shareholders to vote against Elon Musk's pay package, but if I were voting on it, I would have approved it too. That might sound surprising because you know I am all about financial fairness here,

and some people assume the argument here is whether or not it's fair for Elon to get an 11-figure pay package. But to show my work, we have to dig into what the pay package actually is and what it isn't. What it isn't is salary. It's not like Elon Musk is getting a $47 billion paycheck direct deposited into his bank account. Musk actually doesn't have a salary at Tesla. This compensation package consists of stock options, which is a fun, complicated topic for another episode. But essentially, stock options give an employee the option to buy a certain number of their company's shares, often at a discounted price.

In his compensation package, Musk was given the option to buy 303 million shares of Tesla at $23 a share, which is a significant discount from what it's trading at now, which at the time I'm recording this is over $180 a share. We know that the name of the game when it comes to investing is that you want to sell a stock for more than you bought it for, buy low, sell high. The cool thing about stock options is that by getting shares at a discount, you really improve your chances of buying low and selling high. Elon buys a Tesla share for $23 and can sell it for $183. He just made a 7x profit. Multiply that by 303 million shares and that's a lot of money. But here's the most important thing to know. You may have seen the narrative

around the story feel like this comp package came to be because Elon marched into Tesla and said, I make the rules. I am deciding to add 11 zeros into my bank account because I am CEO and I can. But this is not the real story. The comp package was announced by Tesla's comms team all the way back in 2018 when Tesla's market cap was $60 billion. And again, Tesla did not just agree to this eye-boggling figure just because they were feeling generous that day. The comp package was structured around awarding different stock options depending on Musk's ability to hit 28 targets over 10 years. 28 of those targets, nearly half were market cap targets, with the largest being Tesla's ability to reach a $650 billion market cap. And let me do a call

back to what I just said five seconds ago. Tesla's market cap was $60 billion at the time this comp structure was announced. Beyond market cap, eight targets were tied to earnings and another eight were tied to revenue. These targets were bucketed into groups of goals and Tesla's leadership agreed that Musk would be awarded 1% of the stock outstanding for each group of goals he achieved, which totals 303 million shares if all 28 targets were met. Tesla hit $650 billion in market cap four years ago, and he's nearly hit all 28 targets. Let's put it this way. He crossed off enough of the groups of targets that he earned $278 million of the $303 million stock options. Even though Tesla has been on a bit of unstable footing lately,

as I talked about in other episodes, there is absolutely no expert in their right mind who would say that Elon hasn't been an incredible CEO for Tesla. As Barron's put it, quote, the package was essentially Musk's bet on himself. He was betting that he could get Tesla to rise from a valuation of $60 billion to at least $650 billion, a 983% rise while making it profitable over 10 years, end quote. And by the way, he made many people rich along the way. So when it comes to whether or not Elon deserves this comp package, he literally does because he's reached nearly all of the goals that Tesla valued at 303 million shares of the company. So if this is a question of fairness, I think it wouldn't be fair to not give him the package. In my mind, this would be like if I told you I would give you a car

if you came in first for the New York City Marathon and then you trained and trained and trained and you won the whole freaking marathon. And I said, no fair. I didn't think you were actually going to do it. So I'm keeping the car. After the results of the vote came through, Tesla stock rallied. And some financial analysts are predicting that Tesla stock will continue to rise because the uncertainty around Musk's pay package has been this weight holding down the share price. It was no secret that if the comp package was not passed, Elon might wind down his time at Tesla. And it was no secret because Elon said as much. And this obviously unnerved shareholders. Most shareholders think Elon Musk is Tesla and Tesla is Elon Musk. And if you're looking for proof of that, look no further than the 1.76

billion shareholders who voted for Elon to receive the comp package. That's compared to the less than one third 529 million shareholders who voted against Elon receiving the comp package. With Elon reaffirming his commitment to Tesla after this vote, there's a greater sense of stability now around Tesla, which the stock market loves. One tech analyst says that Tesla could reach 350 bucks a share in the next year or so, which would mean that Elon's comp package might be worth a lot more than $47 billion. And it could even mean that Elon Musk would be the first trillionaire. And if that makes you mad, don't be mad at Elon

because he honestly crushed it. If you want to be mad, be mad at Tesla for offering the $47 billion comp package if he hit all of his goals in the first place. For today's tip, you can take straight to the bank. As an investor, you can vote on things at shareholder meetings. If you invested in Tesla, you could have voted on Elon's Scott package too. I love hosting on Airbnb. It's a great way to bring in some extra cash, but I totally get it that it might sound overwhelming to start or even too complicated if say you want to put your summer home in Maine on Airbnb, but you live full time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you.

Airbnb has launched a co-host network, which is a network of high quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you. I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host, so I can still make that extra cash while also making it easy on myself. Find a co-host at Airbnb.com slash

host. One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with features like no maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story.

Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime. Feels like progress. Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A. Members FDIC. SpotMe eligibility requirements and overdraft limits apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and conditions apply. Go to Chime dot com slash disclosures for details. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Go to QIIME.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok

at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.