Elon Musk’s $56 Billion Tesla Bet

The year was 2018. Tesla was valued at about $59 billion. Elon Musk agreed with Tesla to propose to shareholders a series of increasingly difficult financial milestones which would ultimately boost the car company’s value to at least $650 billion. Alongside this goal were a dozen revenue and adjusted profit targets. In return, Musk would be given the right to buy up to 304 million shares at a preset price of $23.34.

It was an all-or-nothing deal. Meet the targets and receive billions in compensation. Miss them, even by a few million, and get nothing. It was a radical, “skin-in-the-game” compensation plan, and a New York Times article on January 23, 2018, cited many experts who said it was laughably impossible, as it would make Tesla one of the five largest companies in the United States.

Many critics dismissed it as another publicity stunt by Musk. And why not? In its latest quarter, the company continued to lose money; the year before, it lost almost half a million dollars an hour. Notably, short-seller Jim Chanos was publicly betting against Tesla, contending that Tesla was worthless.

Musk repeatedly stated that he was not bothered by people like Chanos and was only concentrating on his companies. Still, he understood the magnitude of his commitment because if he failed, “then my compensation would be zero,” he said. But the upside…