Elon Musk is the world’s richest person

January 7, 2021 by No Comments

Elon Musk has become the world’s richest man, surpassing previous record-holder Jeff Bezos, according to CNBC. Musk is now worth more than $180 billion.

Musk’s rising wealth reflects the meteoric rise of Tesla’s stock. The company’s share price closed at $816 on Thursday, up almost 8 percent for the day. That share price values Tesla at almost $800 billion—several times more than any other car company.

CNBC says that Musk’s rise to become the richest man in the world is the fastest in history. At the start of 2020, just over a year ago, Musk was worth only $27 billion. At the time, Tesla stock traded for less than $100 (adjusting for a 2020 stock split).

The stock increased to more than $700 over the course of 2020. Then, in the first week of 2021, it rose above $800.

Big paydays ahead

Musk will become even wealthier in the coming years if he is able to grow Tesla’s revenue and profits. A risky but generous pay package approved by shareholders in 2018 offers Musk up to 12 grants of stock options if Tesla reaches certain milestones for the company’s valuation, revenue, and profits. So far, Musk has qualified for four of the 12 payouts.

To earn the first payout, Tesla’s stock needed to rise to $100 billion and Tesla needed to reach a certain threshold of either revenues or profits. Musk became eligible for a second payout when Tesla reached a value of $150 billion—again along with a revenue or profit target. This process continues until the 12th payout, for which Musk qualifies when Tesla’s market value rises to $650 billion and Tesla reaches higher revenue and profit targets.

The revenue and profit rules are a bit complicated, but for example, Musk will get all 12 awards if Tesla achieves revenues of $175 billion and profits of $6 billion over a one-year period. Between Q4 2019 and Q3 2020, Tesla earned revenues of $28 billion and profits of $550 million. So Tesla will need to grow substantially before Musk gets all of these payments.

If he qualifies for these payouts, they will add substantially to Musk’s wealth. Each option award entitles Musk to purchase 1 percent of Tesla’s shares at a deeply discounted price. So if Musk earns all eight remaining awards, they will add tens of billions of dollars to his net worth.

There’s little mystery about how Musk wants to use his tremendous wealth: he’s determined to send human beings to Mars. His other company, SpaceX, is hard at work developing Starship, a rocket built to enable interplanetary travel. Starship is designed to dramatically reduce the cost of getting people and cargo into space and between planets—perhaps enough that someone with a net worth of more than $200 billion could personally finance a significant Mars program.

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