I would love for one of Matt Levine's scenarios to come true and have the Delaware court refuse to allow Telsa to move its head quarters to Texas because the purpose of that move is to evade the Delaware courts ruling:)
I do think Musk will get a huge pay package but in addition to the problems the article discusses....
- pay can't be for past deeds, which means any new package must be for new price goals, and not past performance
- must be from independent counsel which can't possibly happen with the current Tesla board that was all had picked by Musk and has his brother on it.
- any package would immediately crater the stock as it would cause a huge loss to show up in the balance sheet. This would hurt Musk as he's loaned against his stock, he would be causing a margin call on himself by doing it and would have to. Tesla stock is down 31% already this year, another 10-20% down due to the financial hit of a new pay package means alto more forced selling.
Tesla now has bigger head winds than it did back in 2017.
- Now Tesla has legit competition form US and Chinese manufacturers.
- previously they could sell every car they made and keep the float from pre orders, now they can produce far above their sales levels.
- They used to be able to make money from credits, those had two great features, you could recognize revenue immediately for them and they cost Tesla nothing as they got them by virtue of their core business, technically they got them from other car companies, but it cost Telsa nothing. This free money made up a significant portion of their revenue and will be down to zero within a year or two.
- US tariffs on Chinese cars are helping Telsa, and other US manufacturers, at the moment. Biden just announced tariffs would go from 25% to 100% on Chinese cars shortly. Sooner or later a sub $20,000 Chinese EV will go on sale in the US and Telsa will have to face the innovators dilemma and this is a tipping point that many market leader companies fail to over come.
In 2017 Tesla was losing money hand over fist, was two weeks away from bankruptcy, was in the middle of "production hell" and was facing competition from upcoming Tesla "killers" like the i-Pace. The sentiment was that as soon as Tesla faced real competition from established makers taking electric cars seriously, they'd die.
Today Tesla has >$20B in the bank and is making >$1B per quarter. They're making mistakes, but have the financial headroom to make mistakes.
OTOH in 2017 Tesla stock was dirt cheap, and in 2024 it isn't. It can be argued it was a better investment in 2017, but as a company it's in much better shape now.
> OTOH in 2017 Tesla stock was dirt cheap, and in 2024 it isn't. It can be argued it was a better investment in 2017, but as a company it's in much better shape now.
Fully agree Tesla is in far better shape now than it was in 2017.
> Sooner or later a sub $20,000 Chinese EV will go on sale in the US and Telsa will have to face the innovators dilemma and this is a tipping point that many market leader companies fail to over come.
Article talks about the individual income tax on NSOs in a misleading way. To clear things up, using IRS Pub 525 [1]:
1. As an "nonstatutory stock option that has a readily determinable FMV", the FMV of option would generally be income when it vests. Since it is compensation for services, it would be taxed as ordinary income.
2. When the FMV is included in income upon vesting as described in #1, the taxpayer doesn't have any income when they exercise the option to buy shares.
3. When the taxpayer sells the shares, they have capital gains, but their basis is the amount they pay for it plus any amount included in income previously. In other words, any income included in #1 is not taxed again.
The assertion that there is somehow an individual income tax benefit seems unfounded. Since Tesla has been a publicly traded company at all relevant times, the mechanisms of the income tax shouldn't have changed. (Though of course, the amount of the compensation may differ...)
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[ 2.6 ms ] story [ 34.7 ms ] threadI do think Musk will get a huge pay package but in addition to the problems the article discusses....
- pay can't be for past deeds, which means any new package must be for new price goals, and not past performance
- must be from independent counsel which can't possibly happen with the current Tesla board that was all had picked by Musk and has his brother on it.
- any package would immediately crater the stock as it would cause a huge loss to show up in the balance sheet. This would hurt Musk as he's loaned against his stock, he would be causing a margin call on himself by doing it and would have to. Tesla stock is down 31% already this year, another 10-20% down due to the financial hit of a new pay package means alto more forced selling.
Tesla now has bigger head winds than it did back in 2017.
- Now Tesla has legit competition form US and Chinese manufacturers.
- previously they could sell every car they made and keep the float from pre orders, now they can produce far above their sales levels.
- They used to be able to make money from credits, those had two great features, you could recognize revenue immediately for them and they cost Tesla nothing as they got them by virtue of their core business, technically they got them from other car companies, but it cost Telsa nothing. This free money made up a significant portion of their revenue and will be down to zero within a year or two.
- US tariffs on Chinese cars are helping Telsa, and other US manufacturers, at the moment. Biden just announced tariffs would go from 25% to 100% on Chinese cars shortly. Sooner or later a sub $20,000 Chinese EV will go on sale in the US and Telsa will have to face the innovators dilemma and this is a tipping point that many market leader companies fail to over come.
Today Tesla has >$20B in the bank and is making >$1B per quarter. They're making mistakes, but have the financial headroom to make mistakes.
OTOH in 2017 Tesla stock was dirt cheap, and in 2024 it isn't. It can be argued it was a better investment in 2017, but as a company it's in much better shape now.
Fully agree Tesla is in far better shape now than it was in 2017.
Infact I agree with your entire comment!!
You're expecting the tariffs to be dropped?
those cars work in places where life is cheap, US wont be as accommodating to defects like https://twitter.com/wartranslated/status/1790282371125661952
1. As an "nonstatutory stock option that has a readily determinable FMV", the FMV of option would generally be income when it vests. Since it is compensation for services, it would be taxed as ordinary income.
2. When the FMV is included in income upon vesting as described in #1, the taxpayer doesn't have any income when they exercise the option to buy shares.
3. When the taxpayer sells the shares, they have capital gains, but their basis is the amount they pay for it plus any amount included in income previously. In other words, any income included in #1 is not taxed again.
The assertion that there is somehow an individual income tax benefit seems unfounded. Since Tesla has been a publicly traded company at all relevant times, the mechanisms of the income tax shouldn't have changed. (Though of course, the amount of the compensation may differ...)
[1] https://www.irs.gov/publications/p525