🏎️ what a wild, electric ride
Tesla's entry into the elite $1 trillion club and how it made Elon Musk $36.2 billion richer!
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The Big Story
What a great start to the week for the EV industry.
But especially for Tesla and its CEO Elon Musk who made some historic wins.
On Monday, global car rental giant Hertz made a deal with Tesla to have 100,000 Model 3s to be delivered in the next 14 months. The deal, reportedly worth around $4.2 billion, is the single largest EV fleet purchase in history and will push Hertz’ EV offerings to 20% of its global fleet.
The news quickly sent the electric carmaker's shares to climb 12.7% and close at a record high of $1,024.86, helping Tesla's market value to surpass $1 trillion. Meanwhile, shares of Hertz also rose 10% to $27.17.
So far, only five publicly traded US companies have reached the $1 trillion market valuation: Microsoft, Apple, Amazon and Google's parent firm Alphabet. But interestingly, Tesla is the only carmaker in the world to reach this milestone despite accounting for less than 1% of global car sales.
For years, the electric carmaker has struggled to increase its car production, which invited some speculations regarding the company's ability to succeed in reaching its ambitious goals. That changed last year when CEO Elon Musk boosted investor confidence after making the company profitable for the first time.
That said, the surge in Tesla's stock price following the deal not just boosted the company’s share prices but also propelled Musk's fortune, which rose by $36.2 billion in one day. He's now the world's richest person with a net worth of $288.6 billion—even higher than oil giant Exxon Mobil ($272.43 billion) and Amazon founder Jeff Bezos ($193 billion).
But this gigantic rise in his fortune isn't completely due to Tesla. In October, his aerospace company SpaceX was reported to be worth $100 billion after it reached a private agreement between new and existing investors to sell as much as $755 million in private stock for $560 per share.
To understand this sudden surge in Musk’s net worth, it’s important to note that at Tesla, he does not receive any salary. Instead, his compensation package grants him 12 options tranches that vest when the carmaker's financial growth and market capitalization cross a series of milestones.
These options allow Musk to buy Tesla's shares at $70 each—a more than 90% discount from its current market price.
Just last week, the electric carmaker published its earnings report, declaring a 77% increase in its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to $3.2 billion. This allowed Musk to vest his seventh option tranche, which is now worth over $8 billion.
Witnessing such huge successes with both his ventures, it seems that Musk has no plans of stopping anytime soon. In fact, he recently set an annual sales growth target of 50% for Tesla and ultimately hopes to reach 20 million vehicles per year.
As with all Musk-related news, the internet left no time to meme it...starting obviously with Musk himself, who tweeted -
This memefication was expected as Wall Street treats Tesla not as a tech company but as a meme stock due to the massive dissonance between its valuation and business reality. And while most investors still remain bullish on the company, for the larger investor community, one key question remains: will Elon Musk be able to bridge this gap and deliver on his promises?
Let us know what you think in the comments!
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