2018 Compensation Package update (sale 2028 or earlier):
Believe it or not, the FUD, the short interest, even the phantom shares are not TSLA's biggest problem (and yes, I mean challenges to the SP, not problems for Tesla, who are fine). The biggest problem is Elon's 2018 CEO comp package, and what happens when he exercises his stock options. I've written here exhaustively on the topic, so I'll just summarize here:
So the situation is that shortzes know Elon has to sell a fistful of shares, the SP will drop precipitously when he does (assisted no doubt by more naked shorting), then they can buy HALF of his new shares (~160M) on the open Market at fire sale prices, thus profiting from their years of perpetual shorting. Boo-yah!
- Elon controls ~301M shares via vested stock options; he must exercise b4 exp. 04/28
- Depending on the SP at the time of Excercise, Elon will owe either a huge or a gargantuan income tax bill, payable immediately
- Unless Elon has cash to pay his income taxes, he's forced to sell ~53% of new shares. He also needs cash to pay Tesla the excercise price (EDIT: he could pre-sell older TSLA shares while paying a lower long-term capital gains tax rate to get that cash)
- Selling shares to excercise Elon's 2012 Comp plan took the SP down a hundred bucks in a few days back in Dec 2022. That was just ~10% of the shares granted in the 2018 plan
- a further drag on the SP is that Tesla will owe payroll taxes for Elon's stock compensation (to be reported on the next Qtrly results), which again was large in Q4-2022 (paging @The Accountant for an estimate of payroll taxes due when 2018-plan shares are executed; specifically confirmation that the amnt depends on the SP at time of exercise)
It's an even worse dynamic in this one way, the interests of these shortzes and Elon are somewhat aligned: if the SP is lower, Elon pays less income tax (see the Starlink/FCC hatred for motivation #42 to give less $$ to the Federal Gov't). Bonus: Tesla pays less payroll tax.
Shortzes live in hope for this day (again which is NLT April 2028 or just over 4 years). They can cover, make back all the money they lost since the 5:1 split was announced on Aug 11, 2020. Phantasy League Shortsville.
Tesla is self-funding now, and isn't likely to ever need to go back to the Market to raise capital. Elon/Zach directed Tesla to use cash to pay down debt, thus removing their vulnerability to the Market attacks. This means there's only two sources of legitimate shares (not phantom/naked short shares):
Point No. 2 explains the FUD attacks since CT delivery day in Nov 2023. They NEED your shares, and want to get them CHEEP. They're willing to spend big on a FUD campaign to get as many Retail shareholders as possible to pannick sell. And if certain comments on this forum are to be believed, it works (but public forums are rotten with trolls and eggplants).
- Elon's new shares being sold to pay taxes ( perhaps 160M shares to be sold), or
- Retail shareholders pannick sell (the puffins in the seagulls sights)
Given my assessment above, I see 4 possible scenarios how this could play out:
Which do I think is most likely? #1. Which scenario would I prefer? #3. What will Elon do? WFKNs!
- Elon sells his shares on the Open Market; SP tanks; Elon and Tesla pay minimum taxes; Retail 'weak-hands' pannick-sell and lose out on future gains (and a likely rapid recovery). Elon owns more TSLA after all this, but that's not cash for his City on Mars, which will require moar SELLING later, ad nauseum. Shortzes are the BIG WINNERS,
- Elon finds cash to exercise his shares outside selling TSLA (maybe why the 'G' won't fund rural Starlink, and other Musk Industries?) He still benefits from a lower SP though, so I don't seen him 'pumping' the SP until he's finished exercising his stock options. Big Winner: FATHER TIME since this could take until April 2028 to grind out the cash. (I rate this possibility as the least likely of these 3 options), and
- Elon let's the shortzes swing (see: "Henry Ford" since Aug 2018 | Arttful Dodger on TMC): Elon threatens to take his ball and go home, the SP tanks, Elon exercises his options on the cheap (and pays cash). SHORTZES get nothing, retail HODLers eventually recover ('weak' hands and Options 'gamers' are rekked), and Tesla pays miniumum payroll taxes. I rate this as a phantasy scenario, but we are taking Elon here...
- Elon and the Tesla Board create some sort of novel 'Shares-for-Votes' swap for his next CEO comp. plan: Elon said what he cares about is having ~25% of Tesla voting shares to guide the future of AGI at Tesla (a dubious thesis IMO). Would Elon be willing to trade some or all of his 2018 shares to get that? It'd be $10s of Billion$ to shareholders if he did, so may be accepted in a shareholders vote. Result is SHORTZES lose their exit plan, but have no real enforcement action which causes them to close their perpetual shorts/phantom shares. And the Game goes on... but hopefuly the Board learns that they created all these problems with the terms of their 2018 CEO comp. and will NEVER DO IT AGAIN!
You're Welcome! and Thank-you, too!
Cheers to the longs
P.S. I inserted an edit above that Elon could pre-sell some of his existing shares to obtain the cash he needs to pay income taxes. This could be done as part of a 10b5-1 plan (like other Tesla Executives) with just 90 days notice, and be timed so that are stock options are exercised by April 2028. I truly hope the Board is thinking about exit ramps like this, as I await comments from @mongo
New SEC Insider Trading Rules for Executives Trading in Company Stock | steel-eye.com (Mar 31, 2023)
That's suspiciously close to Elon's exercise price for his 2018 CEO comp. plan shares.
Excerpted from: Tesla Special Proxy Statement Meeting held on Mar 31, 2018:
Exercise Price Fair Market Value (FMV) of Teslacommon stock on the date of grant, January 21, 2018, which was $350.02 per share (based on the closing price on January 19, 2018, the last trading day prior to the grant date).
TSLA has split 15:1 since this plan was adopted by shareholders on Mar 31, 2018 so the equivalent Excercise Price now is $350.02 / 15 = $23.335 so El Gordo's new SP is just 20 cents above that. Who says he can't read?! But this is quick confirmation that GLJ Research is a front for Short-faced bares... and who's paying the bills for the FUD.
Cheers!
P.S. Again, if the SP equals the Excercise Price at the time of excercise, Elon owes no extra income taxes on the gains, only income tax on the shares themselves, and Tesla also only would owe payroll taxes on the total Excercise amnt (paging @The Accountant for confirmation of this interpretation).
