I agree with the sentiment and have wondered some of the same. I've taken many options as well and for the same reason you cite (never making strike price), often negotiated for a lower strike than the current market price for that very reason. Elon could have done the same, did not, adding confidence to the current market price, which is based almost solely on confidence, which you and I are expressing now become less when insiders don't hold shares but sell them...
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TSLA Investor Discussions
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I agree with the sentiment and have wondered some of the same. I've taken many options as well and for the same reason you cite (never making strike price), often negotiated for a lower strike than the current market price for that very reason. Elon could have done the same, did not, adding confidence to the current market price, which is based almost solely on confidence, which you and I are expressing now become less when insiders don't hold shares but sell them...
dmckinstry
Model X 2019
NigelM
Recovering Member
NigelM
Recovering Member
Options at a price below current market has major tax implications, which may end up having you pay tax on a gain that will be realized only 10 years down the line. If the price drops below your lower the option level in this case, you may end up with a tax liability on a gain that doesn't exist in reality.
To stay OT, it does nevertheless indicate a confident belief in the future by Elon.
Yep I think we're general agreement and u were right to clarify options not stock as I should have done initially. My error
(Often the tax implications are worth it, or can be deferred via trust and other offsetting mechanisms, but your point is well taken)
This is news to me. For my past corporate options, there were zero tax events until you exercise.
NigelM
Recovering Member
That's why I said "may". Granting options below market price may be seen as a direct financial benefit, which may be taxable. In Elon's case he apparently takes only $33k in actual salary so other financial benefits would be interesting to the IRS. It's a complicated subject and I'm not a tax accountant.
Let's not go too far OT in this thread please, we can start a new thread Off Topic if it's of high interest.
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Johan
Ex got M3 in the divorce, waiting for EU Model Y!
Let's just agree that if all the mile stones are met in 10 years (including market cap 43bn) the share price will be considerably higher than $31 and Elon will excersise his option, thereby getting a lot rich(er).
NigelM
Recovering Member
Businessweek.com/tesla-grants-musk-option-for-5-dot-27-million-shares-as-incentive
Market seem to like it at least a little bit this morning.
Market seem to like it at least a little bit this morning.
Yeah- Nigel's correct based on my experience. There are good legitimate ways to avoid it (even by adjusting the type of option), but if not careful, the tax boys will forced an assumed gain in the year of grant for the difference in strike and market price.
Back more on-topic though: I still look for non-fully reported shares held by some of those other insiders. They hold too few shares currently to make a statement about their belief - I like the package Elon just put together as a positive sign of where he wants it to go, but then his recent statement is more worrisome. Looking forward to the September charging station (or other) announcement to try and tie it all together I guess
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170.000 shares in three hours is *very* low volume. I wouldn't call that a "market".
Without dilution that share price would be around $430 to get that $43B market cap.
There's no way that TSLA is going to get to $43bn cap without another share issuance. The capital requirements of expanding auto manufacturing at the rate that TM has laid out simply can't be done from cash flow. In particular, the tooling costs for the GenIII lines will need extra cash.
Norbert
TSLA will win
There might some of that, but I think with a good margin, which Tesla has said it is aiming for, I think they can grow to a large car company without much dilution, or perhaps without any at all (especially if they qualify for another DOE loan once profitable, which I think they should, as that would be one of the best uses of tax money possible, and the very purpose of the ATVM program).
That's kind of a cynical way of putting it.
Another way of stating it: Part of your employment package is based on "future money" that may be worthless (underwater options). Any good investment advisor will point you to diversification rather than buying yet more of your employer's stock.
I guess you are right, it is a little cynical. To elaborate, there is not much sense in buying stock at market price if you have options which vest in the future at much lower than current market prices.
Citizen-T
Active Member
Making another run at resistance. Will it break through this time? Last two times were a no go, but the lows are getting higher...
NigelM
Recovering Member
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