Tesla grants Musk a trillion-dollar trophy he’ll never cash, just like the Cybertruck he can’t sell
Tesla’s trillion-dollar pay package for Elon “From the Heart” Musk appears to be all optics, as the goals that represent real progress for the company are as unattainable as the popularity he so craves.
In reality, Musk faces low odds of garnering any of the higher targets. Let’s start with the operational side. Hitting almost all but one of them would require moonshots. For example, the robotaxi target requires achieving an active fleet of 1 million. Today, Tesla offers only an extremely limited pilot plan in Austin, and Waymo, the industry’s largest player, has only 2,000 of the vehicles on the road. And the easiest Ebitda level stands at a towering $50 billion. Ringing the bell would likely require multiplying its current Ebitda run rate around fivefold. Yet Tesla’s now going in the wrong direction by booking puny and declining profits. Reversing that downward trend to reach even the minimum profitability mandated in the operational milestones can only happen if its unproven products prove wildly successful in highly competitive, and capital-intensive sectors.
Now to the valuation milestones. Tesla’s stock already appears vastly overpriced. Its current multiple, based on “core” earnings from its auto and battery businesses of just $3.6 billion in the past four quarters, excluding such items as sales of regulatory credits, towers at 375. Hitting the second highest valuation mark of $2.5 trillion alone would require an 85% jump in its stock price. Huge progress that’s not happening is already baked into the valuation, making the chances of huge, sustained gains from here remote, though a Musk-orchestrated, ephemeral surge can always happen.
The trillion-dollar pay deal is a masterclass in vaporware economics: a headline meant to dazzle investors while delivering nothing. Experts say there’s little chance Musk will ever hit the performance targets needed to collect the mythical payout, making it less a reward and more a participation trophy to make Elon feel good. Meanwhile, the Cybertruck continues its transformation from child’s crayon scrawl to fiscal black hole, one stainless steel flop at a time.
“It’s like a cool high-end product parked in front of a hotel,” Ford
F-0.24% CEO Jim Farley said of the Cybertruck in 2023. “But I don’t make trucks like that. I make trucks for real people who do real work, and that’s a different kind of truck.”
There’s also the issue of Musk, who has become an increasingly polarizing figure over the past few years thanks to his forays into politics. Unlike other Tesla vehicles, which more closely resemble the average car on the road, the Cybertruck is a statement piece that is tough to separate from the Tesla CEO.
It is all about building the legend-in-his-own-mind for Musk. The single thing he has created vs just investing in, the truck, is a massive flop and his pay package is built to fail.
If my only options were walking or riding in a "Cyber" "Truck", I'd walk. (Same with Tesla.)
If giving the man-child a participation trophy that he can point at (and that won’t get cashed out) gets him to STFU, I’d be ok with that.