Elon Musk likely isn’t done selling Tesla — he still has $7 billion worth of stock options to exercise before August

Tesla CEO Elon Musk stepping out of a silver Tesla wearing a white shirt and black tie on a sunny day
Elon Musk has overseen a huge rally in Tesla’s share price.

  • Elon Musk still has 8 million Tesla stock options to exercise before August 2022, despite his recent selling spree.
  • At Monday’s closing price they’d be worth $7.52 billion, before the taxman took a slice.
  • Yet Musk is set for an even bigger windfall from his huge 2018 pay deal, which could give him 101.3 million options.

Elon Musk has now exercised almost 15 million of the 22.9 million Tesla stock options he was granted in 2012, and he’s probably not done yet.

The Tesla CEO still has 7.9 million left to go before they expire in August next year. If he fires the options up, the shares could net him around $7.5 billion, based on Tuesday’s closing price of $958.51.

But the electric-car maker’s share price has fallen hard in recent weeks, as investors balked at its lofty level, with some concerned by Musk’s recent selling spree. 

Musk — who’s just been picked as Time’s Person of the Year — has been exercising his options at a rapid pace in recent weeks, and has sold large chunks of those shares to meet tax obligations.

Tesla’s closing price on Tuesday was more than 21% below its record high, touched in November. On the other hand, it is still up almost 36% year to date.

The 2012 option grant gives Musk the right to buy Tesla shares at $6.24 — less than 1% of its current value — before the August 2022 deadline.

Even at Monday’s price, Musk could still end up $7.52 billion to the good. It would cost him about $49.3 million to exercise the remaining options, and he could sell the shares for about $7.57 billion.

Yet the taxman would take a chunky slice of those billion-dollar gains: Some speculate taxes could total about 50% or more, because of the way Musk’s salary and compensation is structured.

Musk’s selling spree

On Monday, Musk exercised 2.1 million more options, then turned around and sold 934,000 shares to cover taxes. He has also been dumping some of the shares in his personal trust.

Musk’s overall sales now come to around 12 million shares, which has netted him just shy of $13 billion before tax.

The Tesla boss said in September that he would exercise and sell a “huge block of options” in the fourth quarter, referring to the 2012 grant.

Just before that, Musk put in place a plan to start exercising his options and selling some of the proceeds to cover taxes, according to filings.

In fact, he did this before making waves by posting a Twitter poll asking whether he should sell 10% of his stake in Tesla, the world’s most valuable carmaker.

The 2018 pay deal is even more generous

Once Musk’s accountants have dealt with his 2012 options, their focus will turn to his huge 2018 compensation deal.

In that year, Tesla said it would award Musk 101.3 million options with a strike price of $70.01, as long as he hit various financial targets and stayed on as boss.

Read more: UBS: Invest in these 4 disruptive technologies, which will deliver 16% annual earnings growth and outpace Big Tech titans like Apple and Tesla over the next 5 years

Musk has met those targets faster than thought possible. The company has logged a huge stock-price increase and newfound profitability.

At last count, Tesla had awarded Musk half of the options, which adds up to 50.65 million shares. At a strike price of $70.01, they’d be worth around $45.5 billion, if converted at Monday’s price.

But it’s anyone’s guess where Tesla’s stock price will stand in seven years’ time, or even next week.

“It’s an enormous amount of cash, but it’s worth remembering that when the targets were set, they appeared incredibly ambitious,” said Craig Erlam, senior market analyst at Oanda.

“The share price seems incredibly high — but that has been thrown at companies for years that have gone from strength to strength.”

Read the original article on Business Insider