Elon Musk has, to put it mildly, a penchant for the dramatic.

The Tesla (NASDAQ: TSLA) CEO has said he wants to send humans to Mars within the next decade.

SpaceX’s technology, he’s said, could take humans on a trip from Los Angeles to New York in as little as 25 minutes.

He’s envisioned an entire transportation system underneath the city of Los Angeles.

So, it comes as no surprise that his flair for theatricality extends to his own salary…

The Gamble

Musk’s new compensation plan with Tesla — which, like some of his more blue-sky announcements, sounds a bit like a publicity stunt — involves Musk only getting paid if a series of meteoric milestones based on Tesla’s operations and market value is achieved.

If those milestones aren’t reached, then he’ll get paid a big fat nothing.

Basically, Tesla has set a dozen targets, each $50 billion more than the next: starting at $100 billion, then $150 billion, then $200 billion, and so on — all the way to the idealized market value of $650 billion.

In addition, the company has set a dozen revenue and adjusted profit goals. Musk would receive 1.68 million shares — about 1% of the company — after each milestone is reached.

Musk could make as much as $55 billion if he finds a way to raise Tesla’s current $59 billion market value to the projected $650 billion.

Musk told the New York Times:

If all that happens over the next 10 years is that Tesla’s value grows by 80 or 90 percent, then my amount of compensation would be zero.

I actually see the potential for Tesla to become a trillion-dollar company within a 10-year period.

To call Musk’s goals far-fetched is an understatement; Tesla has missed production targets again and again and again.

And the $650 billion valuation would put Tesla among the five biggest companies in the U.S. — despite that it’s continuing to burn cash at an incredibly alarming rate.

Stunt or not, Musk’s plan reflects an ongoing trend in the tech industry toward stratospheric valuations. Apple, Alphabet, Microsoft, Amazon, and Facebook rank consistently among the world’s most valuable companies. And tech stocks as a whole have continued to rise.

Of course, eye-watering valuations in Silicon Valley aren’t entirely unalloyed good.

The same trends that have made tech companies so profitable — advanced manufacturing, logistics, artificial intelligence, and automation — also require fewer and fewer people to create and service products.

Netflix is making the theater industry obsolete. Tesla is developing self-driving technology that could eventually help put 3.5 million truck drivers out of work. Amazon’s new cashier-less store in Seattle barely employs anyone at all.

Companies like Apple and Amazon, meanwhile, outsource low-skilled labor, exacerbating inequality within their ranks. About 10% of Amazon’s Ohio employees rely on food stamps. And this was while, earlier this month, Jeff Bezos became the richest person in history.

Executive salaries at the level that Musk is targeting, once unimaginable, may eventually become the norm.

All of which makes Musk’s compensation plan both eerily utopian and somewhat terrifying to those who care about who owns the future.

If Musk’s projections are correct, it will be because a world in which Tesla is worth $650 billion will be radically different from the one we know now.

It actually seems like Musk is trying his hardest to keep Tesla up with the Joneses of technology…

Too Little, Too Late?

Despite, Musk’s latest attempts to thrust Tesla into the limelight, it might not be enough to completely save the notorious electric car-maker.

Auto industry veteran Bob Lutz is currently recommending the Tesla Model S to collectors of rare automobiles.

That means only one thing: Tesla is failing and nothing short of a miracle will save it.

Lutz, high on the Model S but down on its manufacturer, told an audience of vintage car collectors in Scottsdale, Arizona, that they should consider buying a Model S “while they’re still available.”

With a storied career that’s spanned BMW, Ford, Chrysler, and General Motors, Lutz has always been blunt and outspoken, separating him from the marketing-speak that pervades the auto industry.

Known in the industry as the “car guy,” he’s a lover of the Model S luxury electric sedan.

According to Lutz, the Model S, especially with the performance upgrades, is one of the fastest, best-handling, best-breaking sedans that you can buy in the world today. The acceleration times will beat any $350,000 European exotic.

But he’s said Musk “hasn’t figured out the revenues have to be greater than costs … when you are perennially running out of cash you are just not running a good automobile company.”

Lutz doesn’t see anything on the horizon that will fix that, so those who are interested in collector cars should look into buying a Tesla Model S while they’re still available.

Twenty-five years from now, the Model S will be remembered as the first really good-looking fast electric car…

Followed by this general consensus about Tesla: too bad it went broke…

The Bottom Line

This latest proposal is similar to the structure of Musk’s last salary package, which was set back in 2012.

Under that plan, Musk was awarded stock options that vested only if the company continued to perform well and reach certain milestones.

Well, it’s also no secret that Tesla has been seriously underperforming, missing production deadlines, and burning through mountains of cash.

The polymath entrepreneur has said many times, however, that he’s not driven by money.

Nevertheless, Tesla’s new plan is quite the challenge.

But interestingly enough, Musk’s proposed remuneration plan no longer includes vehicle output targets, unlike his previous deal.

If Musk only hits just a few of the proposed milestones, he’ll make billions in the value of his shares.

As compensation plans go, Tesla’s proposal is about as friendly to shareholders as they come. If Tesla succeeds in hitting the proposed benchmarks, the company’s employees, including those who work on the factory floor and who get paid in both cash and stock, could potentially become quite wealthy.

But I guess we’re back to where we were with Tesla before Musk’s latest announcement: We’ll just have to wait and see what happens.

That’s all for now.

Until next time,

John Peterson
Pro Trader Today