People talk about how Elon had a 2018 CEO pay package that resulted in $56 billion in value. However, what if he was paid double the cash but only if he was immediately required to buy call options.
In 2018 and 2019, there were CEOs getting $125 million to $250 million in mostly cash. Elon Musk was in that category of high value CEO. It would have been totally justified to pay Elon $250 million per year in cash. He could have been offered to get double the cash in salary but only if he was required to buy 3 year call options for 2X, 3X, 4X, 5X etc… the stock price of Tesla in 2018. This would have been when the share price was $23 (using today post split prices, 5:1 an 3:1 split).
2018 call options would have gone up about 100X for a 10X increase in stock price.
2019 call options would have gone up about 100X for a 10X increase in stock price.
2020 call options would have gone up about 40X for a 5X increase in stock price.
$500M in salary in 2018 would have become $50B. $500M in salary in 2019 would have become another $50B.
2020 salary would have become $20B. Just those three years would have resulted in $120 Billion for Elon Musk.
The company can create the market for these call options as there is not enough trading to produce it on the open market.
Even a $250M in salary would produce more than the $56 billion in the actual 2018 CEO compensation package.
$250M in 2018 would have become $25B. $250M in salary in 2019 would have become another $25B.
2020 salary would have become $10B. Just those three years would have resulted in $60 Billion for Elon Musk.
Here are the current prices for 2026 call options at about double the current $181 share price.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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Unless you are the government or the federal Reserve it is challenging to create $56 Billion out of thin air.
Most transactions include a counterparty. If the corporation was paying for the calls this would be destructive- their money would be better used in research or production activities. In usual option trading with large corporations the sellers and buyers are in balance; I do not see this with a thinly traded option.