Elon Musk’s multi-billion paycheck just got approved by stockholders. That could be a fraction of what’s coming

New York (CNN) — Tesla shareholders on Thursday confirmed they want Elon Musk to get a massive record pay package for running Tesla for the last six years. The question now is, how much will he get going forward?

The package, made up of 303 million stock options worth more than $47 billion based on the current value of Tesla shares, was thrown out in January by a judge in Delaware, where Tesla has been incorporated. Delaware Chancery Court Chancellor Kathaleen McCormick ruled in favor of a shareholder suit that the process by which Musk was awarded the options was “deeply flawed” and did not pass the burden of fairness.

It’s not clear if even with the new shareholder vote that Musk will have the options returned to him, according to legal experts.

“It’s not an automatic fix. It doesn’t override the decision,” Samantha Crispin, partner and chair of the corporate department at global law firm Baker Botts, told CNN. “The chancellor found a number of defects in the process.”

But Tesla shareholders also approved moving Tesla’s state of incorporation to Texas, partly in reaction to the Delaware decision. So even if the courts in Delaware continue to rule against the pay package, the Tesla board could grant a new stock option award to Musk, although there would be negative tax implications for doing so rather than simply voting to restore the earlier options.

Musk, who is not paid any kind of cash salary or bonus at Tesla, has been essentially working for free for more than a year, since Tesla hit the financial targets that awarded him the last of the options available in the 2018 package.

The need for more options?

It is clear that Musk believes he needs to receive additional stock options. Earlier this year he said he would not want to grow Tesla to become a leader in artificial intelligence and robotics — areas where he promised growth — without a compensation plan that would give him ownership of around 25% of the company’s stock. That would be about double the roughly 13% stake he currently owns. Although, if the 303 million stock options just re-approved by shareholders are restored, and if he exercises those options, his stake would top 20%.

“I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned,” Musk tweeted in January shortly before McCormick’s ruling. “Unless that is the case, I would prefer to build products outside of Tesla.” But Musk has suggested that the question of a new pay package would likely be delayed until questions about the 2018 package are finally settled.

Musk was not asked about a new pay package at Thursday’s annual shareholder’s meeting, which observers might consider an absolute love fest as shareholders heaped praise on the billionaire tech mogul.

But the Tesla board made clear it believes some form of significant compensation is crucial  to keeping him focused on Tesla and the challenges ahead, including his promises about making self-driving cars and humanoid robots widely available.

“What we recognized in 2018 and continue to recognize today is that one thing Elon most certainly does not have is unlimited time,” Tesla board chair Robyn Denholm wrote to Tesla shareholders ahead of the most recent vote. “Nor does he face any shortage of ideas and other places he can make an incredible difference in the world. We want those ideas, that energy and that time to be at Tesla, for the benefit of you, our owners.”

Other Musk fans in the investment community also want to see him get additional shares of Tesla, even if that means their own holdings are diluted. They see Musk as the driving force behind Tesla’s success, and crucial for its success into the future. Some are particularly eager to see him execute his plans for self-driving cars and robotaxis that they believe will change the economics of personal transportation even more than Tesla has changed the auto industry by spurring widespread use of EVs.

“The idea of him acquiring more shares doesn’t scare me,” said Tasha Keeney, director of investment analysis at ARK Invest, which has the most bullish forecast for Tesla. “I think look at this as an extreme pivotal moment. That’s why it’s important to have Elon at Tesla and engaged and incentivized appropriately.”

Elon Musk, the first trillionaire?

Musk told shareholders Thursday he’s not planning on going anywhere, and said he thinks Tesla could succeed even without him, although he described himself as an “accelerant” to that success.

It’s not clear how much any additional holdings would be needed to provide Musk with financial incentives to focus on Tesla, and take him to unprecedented levels of wealth. If the company’s stock does as well as Musk and his fans predict, his current holdings would appreciate in value so much that his 2018 $47 billion pay package will look like an afterthought.

Ark Invest has a five-year target price for Tesla shares at $2,600 a share. That would be a 1,300% gain from its current value, something that would lift its total market cap to about $8 trillion, or more than the current values of Microsoft and Apple, combined, by 2029.

Even if Musk doesn’t get the options from 2018 restored, his current holdings of 411 million shares, which are today worth a mere $73 billion, would be worth more than $1 trillion if Tesla shares hit that $2,600 target. That likely would make Musk the world’s first trillionaire, with his net worth rising more than the current net worths of the next five people on Bloomberg’s Billionaires list — Jeff Bezos, Bernard Arnault, Mark Zuckerberg, Larry Page and Bill Gates — combined. And that doesn’t even count his holdings in other companies such as SpaceX.

Not everyone on that list got there through packages of stock options. For example, Bezos, the founder of Amazon, and Zuckerberg, who co-founded Facebook, both took large stakes in their companies as founders, but neither has received stock grants or options since those companies had initial public offerings in 1997 and 2012, respectively.

In her decision, McCormick rejected the argument that Musk would be uncompensated if the package was thrown out, writing, “Musk’s preexisting equity stake provided him tens of billions of dollars for his efforts.”

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