SpaceX has a giant IPO arising, however the subsequent step may be a merger of SpaceX and Tesla. And if that’s the case, it may very well be a backdoor to triggering Elon Musk’s trillion-dollar pay package deal mechanically, with out having to fulfill any of the operational milestones, thus diluting everybody’s shares with out delivering on the guarantees that had been made.
Late final 12 months, Tesla shareholders voted on the biggest CEO pay package deal ever, orders of magnitude greater than the second-largest ever (which was additionally for Musk, and additionally an order of magnitude bigger than the third-largest).
The package deal was totally ridiculous in its design, however the advertising and marketing effort placed on by Tesla to persuade shareholders to vote for it succeeded, and the measure handed. Regardless of that it’s going to dilute shareholders and retain a foul CEO who has overseen – er, uh, been distracted by being racist on twitter throughout – the corporate’s falling gross sales, sufficient cheap folks appear to have already offered their shares that those who stay had been gullible sufficient to make this unhealthy choice.
However the package deal did have one redeeming high quality to it. It was designed in such a means that it was break up into 12 tranches of inventory, and every tranche had more and more tough efficiency milestones connected that will require the corporate to develop not simply by market cap, however in its operations.
Briefly, Musk couldn’t get his cash simply by pumping the inventory and doing monetary tips in one of many least reality-based markets in historical past, Tesla would really should promote issues like ahealthy firm would possibly. Like delivering 20 million Tesla automobiles, 10 million FSD subscriptions, 1 million “Bots,” or 1 million industrial Robotaxis, together with a number of milestones associated to longterm profitability.
The character of the operational milestones was a problem – a few them could be fairly simple to fulfill or have built-in shenanigans of their very own, thus granting Musk tens of billions of {dollars}, nonetheless the biggest CEO pay package deal in all of historical past, for just about no effort – however the idea was nonetheless there.
(SpaceX has comparable milestones set out, however they’re much more ridiculous – 100TW of orbital compute and a 1 million inhabitants Mars colony, neither of which will occur)
It’s even proper there within the official identify of the award: “2025 performance-based inventory settlement.”
So, each by way of the advertising and marketing of the award (which is an issue itself – Tesla mustn’t have spent cash to market this award, nor ought to Musk’s family and friends on the board have been concerned in recommending it), and even the naming of it, Tesla wished everybody to know that it will solely be given out if the corporate did nicely.
And but, it was all a lie.
How Musk can get $1 trillion in inventory with zero Tesla gross sales
It turns on the market was some language within the contract that went largely ignored.
The language is a part of the “change in management” part, which reads like this:
IV. Dedication of Earned Shares upon Change in Management
However Sections I, II and III above, within the occasion of a Change in Management, the Operational Milestones shall be disregarded and the Market Capitalization shall equal the product of (a) the overall variety of excellent Shares instantly previous to the efficient time of such Change in Management, as reported by the Firm’s switch agent, and (b) the larger of (i) the newest closing value per Share instantly previous to the efficient time of such Change in Management, as reported by the Main Alternate (or different dependable supply chosen by the Administrator if the Main Alternate is just not reporting a closing value for that day), and (ii) the per Share value (plus the per Share worth of another consideration) obtained by the Firm’s shareholders within the Change in Management. For functions of Certification, the Administrator shall assess in accordance with the instantly previous sentence the extent to which the Market Capitalization Milestones can be glad on account of the Change in Management. To the extent that the Shares allotted to a Tranche haven’t turn into Earned Shares as of instantly earlier than the efficient time of the Change in Management and in any other case don’t turn into eligible to turn into Earned Shares on account of the Change in Management, such Tranche can be forfeited mechanically as of the efficient time of the Change in Management.
There. Did you catch it?
Okay, that half is dry and no person cares. Blah blah, issues are totally different if he sells the corporate earlier than reaching the milestones. In fact.
A “change in management” might imply a number of issues, however one of many issues it might imply is a buyout or merger.
However right here’s the deal: the above language says that “the Operational Milestones shall be disregarded“ within the occasion of a change in management. As a substitute, solely the market capitalization (shares excellent multiplied by share value) can be thought of.
However Tesla’s market capitalization is at the moment inordinately excessive, with TSLA promoting at a price-to-earnings ratio of round 400. This quantity is 20-40x greater than would historically be thought of cheap, even for a development firm, and particularly for a corporation that’s at the moment shrinking and tasks itself to shrink additional with a high-spending interval arising that can doubtless push earnings to the unfavourable.
And regardless of TSLA’s present overvaluation, its market capitalization would doubtless go up additional if there have been merger/buyout talks, as typically occurs when these talks happen. At present pricing, he wouldn’t get the complete set of 12 tranches – however with market frothiness, merger rumors, and all-stock offers at loopy valuations, who is aware of what might occur.
However who would ever wish to purchase TSLA at such an inflated value? Nicely, look no additional than one man who has proven an inclination to do precisely that, self-dealing his personal firms so as to lock in ridiculous valuations…
Musk loves self-dealing monetary shenanigans
We’ve already seen this occur, twice, with Musk’s favourite social media platform, twitter, the place he spends mainly all of his time (as a substitute of operating his firms).
First, he paid $44 billion for twitter in 2022, when the corporate was value nowhere near that. Then, after making that horrible deal, he spent $45 billion on twitter once more in 2025, promoting it from himself to xAI, which he then offered to SpaceX, after having Tesla spend money on it.
Twitter was not value both of these numbers for both of these purchases, however within the second occasion, Musk purchased it from himself in an all-stock deal, and so he might make up no matter value he wished.
It’s a part of a sample of self-dealing the place Musk will interact in monetary shenanigans to inflate the worth of his firms with out really displaying any kind of development within the firms.
And a possible Tesla/SpaceX merger would simply be one other instance of the identical sample. For that reason, many observers contemplate it not only a risk, however an inevitability, particularly given each firms are at the moment pretending to be AI powerhouses (regardless of FSD nonetheless not working and SpaceX’s orbital AI information heart plan being dumb as hell).
The entire scenario across the potential merger is made worse by a current rule change by NASDAQ, which Musk pushed for. This rule will enable SpaceX to be listed on the trade simply ten days after IPO, as a substitute of a 12 months as was beforehand the case.
So, whereas the corporate is at its absolute frothiest valuation, it is going to be added to the NASDAQ, which implies that passive funding fund cash will movement into it as NASDAQ or S&P 500-holding funds rebalance their portfolios to incorporate SpaceX shares.
Which means that mainly anybody holding an index fund – that’s, just about everybody’s retirement fund – can be compelled to purchase SpaceX at an extremely excessive valuation, thus transferring cash from folks’s retirements into the pockets of Elon Musk.
That inventory might then be leveraged for an all-stock merger of the 2 firms, which might ship valuations even greater, as buyout and merger talks typically do, particularly after they contain a self-dealer with a penchant for fantastical valuations. And SpaceX’s IPO prospectus appears to incorporate language permitting such a merger to occur throughout the 180-day post-IPO lockup interval.
However what’s the purpose of all these excessive valuations? If each firms go up in valuation, it’s good for his or her buyers, and neither of them is getting a foul deal in the event that they’re each up, so, no drawback, proper?
This could dilute everybody’s retirement account
The entire level of a public firm is in order that these with a monetary stake within the firm have some management over the path of the corporate. If the corporate’s CEO or boardmembers began performing towards the pursuits of the shareholders, say by giving traditionally monumental bribes with the direct impact of destroying the corporate’s enterprise or by publicly performing like a Nazi on a regular basis (you realize, excessive examples that might by no means moderately occur… proper?), then the shareholders can vote to place the corporate again on observe.
But when the only shareholder working towards the pursuits of the corporate has sufficient management, within the type of super-voting inventory or just a excessive share rely, then the shareholders can do nothing as he sinks firm efficiency.
Additional, if massive quantities of inventory are given to that single shareholder, the cash for that’s coming immediately from shareholders. As shares are printed to extend one individual’s possession stake, each different individual’s possession stake goes down. That implies that your fraction of possession is decrease, and your inventory worth is decrease.
This dilution would profit precisely one individual: the one individual on this planet who at the moment has the next wealth-number than anybody else, and would hurt everybody else who occurs to be invested in that inventory (or in residing on a planet that mister “1,000ppm is simply high-quality” is throwing his weight round on).
However, as we coated above, these shareholders would not simply be the Tesla devoted, who’ve been pleased to be fleeced by the white supremacist they’ve crafted their personas round.
They’d be everybody with a retirement account, all of which might be compelled to place a mixed ~5% of their internet wealth into this chimera of firms that desires you to consider it should lead in robots (which are remote-controlled), self-driving automobiles (that can’t drive themselves), a Mars colony (that isn’t sensible), and orbital information facilities (that can’t cool themselves off).
And everybody can even tackle vital threat of this home of playing cards falling down, whereas Musk will certainly have one other monetary trick up his sleeve coming quickly to attempt to weasel out of any eventual penalties be brings on everybody’s retirement accounts.
(Fortunately, at the very least some Danes will keep away from this destiny – AkademikerPension, one in every of Denmark’s largest retirement funds which has spoken out towards Musk’s ridiculous shenanigans earlier than, has refused to purchase into the SpaceX merger, citing “catastrophic governance“)
And thus, everybody with a retirement account can be compelled to contribute cash to this non-performing “efficiency” award for a man whose essential curiosity, in the event you learn his output on the platform he treats as a full-time job, is to make use of his unearned wealth to impose white supremacy and do issues which are, and I quote one Elon Musk on this one: “not good for America or the world.”
We wrote in October that “Elon Musk’s $1 trillion pay day will get extra ridiculous the extra you look into it,” and, nicely, it seems to be just like the vote wasn’t the top of it.
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