SpaceX has a big IPO coming up, but the next step might be a merger of SpaceX and Tesla. And if so, it could be a backdoor to triggering Elon Musk’s trillion-dollar pay package automatically, without having to meet any of the operational milestones, thus diluting everyone’s shares without delivering on the promises that were made.
Late last year, Tesla shareholders voted on the largest CEO pay package ever, orders of magnitude higher than the second-largest ever (which was also for Musk, and also an order of magnitude larger than the third-largest).
The package was utterly ridiculous in its design, but the marketing effort put on by Tesla to convince shareholders to vote for it succeeded, and the measure passed. Despite that it will dilute shareholders and retain a bad CEO who has overseen – er, uh, been distracted by being racist on twitter during – the company’s falling sales, enough reasonable people seem to have already sold their shares that the ones who remain were gullible enough to make this bad decision.
But the package did have one redeeming quality to it. It was designed in such a way that it was split into 12 tranches of stock, and each tranche had increasingly difficult performance milestones attached that would require the company to grow not just by market cap, but in its operations.
In short, Musk couldn’t get his money just by pumping the stock and doing financial tricks in one of the least reality-based markets in history, Tesla would actually have to sell things like ahealthy company might. Like delivering 20 million Tesla vehicles, 10 million FSD subscriptions, 1 million “Bots,” or 1 million commercial Robotaxis, along with several milestones related to longterm profitability.
The nature of the operational milestones was an issue – a couple of them would be quite easy to meet or have built-in shenanigans of their own, thus granting Musk tens of billions of dollars, still the largest CEO pay package in all of history, for virtually no effort – but the concept was still there.
(SpaceX has similar milestones set out, but they’re even more ridiculous – 100TW of orbital compute and a 1 million population Mars colony, neither of which will happen)
It’s even right there in the official name of the award: “2025 performance-based stock agreement.”
So, both through the marketing of the award (which is a problem itself – Tesla should not have spent money to market this award, nor should Musk’s friends and family on the board have been involved in recommending it), and even the naming of it, Tesla wanted everyone to know that it would only be given out if the company did well.
And yet, it was all a lie.
How Musk can get $1 trillion in stock with zero Tesla sales
It turns out there was some language in the contract that went largely overlooked.
The language is part of the “change in control” section, which reads like this:
IV. Determination of Earned Shares upon Change in Control
Notwithstanding Sections I, II and III above, in the event of a Change in Control, the Operational Milestones shall be disregarded and the Market Capitalization shall equal the product of (a) the total number of outstanding Shares immediately prior to the effective time of such Change in Control, as reported by the Company’s transfer agent, and (b) the greater of (i) the most recent closing price per Share immediately prior to the effective time of such Change in Control, as reported by the Primary Exchange (or other reliable source selected by the Administrator if the Primary Exchange is not reporting a closing price for that day), and (ii) the per Share price (plus the per Share value of any other consideration) received by the Company’s shareholders in the Change in Control. For purposes of Certification, the Administrator shall assess in accordance with the immediately preceding sentence the extent to which the Market Capitalization Milestones will be satisfied as a result of the Change in Control. To the extent that the Shares allocated to a Tranche have not become Earned Shares as of immediately before the effective time of the Change in Control and otherwise do not become eligible to become Earned Shares as a result of the Change in Control, such Tranche will be forfeited automatically as of the effective time of the Change in Control.
There. Did you catch it?
Okay, that part is dry and nobody cares. Blah blah, things are different if he sells the company before reaching the milestones. Of course.
A “change in control” could mean several things, but one of the things it could mean is a buyout or merger.
But here’s the deal: the above language says that “the Operational Milestones shall be disregarded“ in the event of a change in control. Instead, only the market capitalization (shares outstanding multiplied by share price) will be considered.
But Tesla’s market capitalization is currently inordinately high, with TSLA selling at a price-to-earnings ratio of around 400. This number is 20-40x higher than would traditionally be considered reasonable, even for a growth company, and especially for a company that is currently shrinking and projects itself to shrink further with a high-spending period coming up that will likely push earnings to the negative.
And despite TSLA’s current overvaluation, its market capitalization would likely go up further if there were merger/buyout talks, as generally happens when those talks occur. At current pricing, he would not get the full set of 12 tranches – but with market frothiness, merger rumors, and all-stock deals at crazy valuations, who knows what could happen.
But who would ever want to buy TSLA at such an inflated price? Well, look no further than one guy who has shown a tendency to do exactly that, self-dealing his own companies in order to lock in ridiculous valuations…
Musk loves self-dealing financial shenanigans
We’ve already seen this happen, twice, with Musk’s favorite social media platform, twitter, where he spends basically all of his time (instead of running his companies).
First, he paid $44 billion for twitter in 2022, when the company was worth nowhere close to that. Then, after making that terrible deal, he spent $45 billion on twitter again in 2025, selling it from himself to xAI, which he then sold to SpaceX, after having Tesla invest in it.
Twitter was not worth either of those numbers for either of those purchases, but in the second instance, Musk bought it from himself in an all-stock deal, and so he could make up whatever price he wanted.
It’s part of a pattern of self-dealing where Musk will engage in financial shenanigans to inflate the value of his companies without actually showing any sort of growth in the companies.
And a potential Tesla/SpaceX merger would just be another example of the same pattern. For this reason, many observers consider it not just a possibility, but an inevitability, especially given both companies are currently pretending to be AI powerhouses (despite FSD still not working and SpaceX’s orbital AI data center plan being dumb as hell).
The whole situation around the potential merger is made worse by a recent rule change by NASDAQ, which Musk pushed for. This rule will allow SpaceX to be listed on the exchange just ten days after IPO, instead of a year as was previously the case.
So, while the company is at its absolute frothiest valuation, it will be added to the NASDAQ, which means that passive investment fund money will flow into it as NASDAQ or S&P 500-holding funds rebalance their portfolios to include SpaceX shares.
This means that basically anyone holding an index fund – that is, virtually everyone’s retirement fund – will be forced to buy SpaceX at an incredibly high valuation, thus transferring money from people’s retirements into the pockets of Elon Musk.
That stock could then be leveraged for an all-stock merger of the two companies, which could send valuations even higher, as buyout and merger talks often do, especially when they involve a self-dealer with a penchant for fantastical valuations. And SpaceX’s IPO prospectus seems to include language allowing such a merger to happen within the 180-day post-IPO lockup period.
But what’s the point of all these high valuations? If both companies go up in valuation, it’s good for their investors, and neither of them is getting a bad deal if they’re both up, so, no problem, right?
This would dilute everyone’s retirement account
The whole point of a public company is so that those with a financial stake in the company have some control over the direction of the company. If the company’s CEO or boardmembers started acting against the interests of the shareholders, say by giving historically enormous bribes with the direct effect of destroying the company’s business or by publicly acting like a Nazi all the time (you know, extreme examples that could never reasonably happen… right?), then the shareholders can vote to put the company back on track.
But if the single shareholder working against the interests of the company has enough control, in the form of super-voting stock or simply a high share count, then the shareholders can do nothing as he sinks company performance.
Further, if large amounts of stock are given to that single shareholder, the money for that is coming directly from shareholders. As shares are printed to increase one person’s ownership stake, every other person’s ownership stake goes down. That means that your fraction of ownership is lower, and your stock value is lower.
This dilution would benefit exactly one person: the one person in the world who currently has a higher wealth-number than anyone else, and would harm everyone else who happens to be invested in that stock (or in living on a planet that mister “1,000ppm is just fine” is throwing his weight around on).
But, as we covered above, those shareholders would no longer just be the Tesla faithful, who have been happy to be fleeced by the white supremacist they have crafted their personas around.
They would be everyone with a retirement account, all of which would be forced to put a combined ~5% of their net wealth into this chimera of companies that wants you to believe it will lead in robots (that are remote-controlled), self-driving cars (that can’t drive themselves), a Mars colony (that isn’t realistic), and orbital data centers (that cannot cool themselves off).
And thus, everyone with a retirement account will be forced to contribute money to this non-performing “performance” award for a guy whose main interest, if you read his output on the platform he treats as a full-time job, is to use his unearned wealth to impose white supremacy and do things that are, and I quote one Elon Musk on this one: “not good for America or the world.”
And everyone will also take on significant risk of this house of cards falling down, while Musk will surely have another financial trick up his sleeve coming soon to try to weasel out of any eventual consequences be brings on everyone’s retirement accounts.
We wrote in October that “Elon Musk’s $1 trillion pay day gets more ridiculous the more you look into it,” and, well, it looks like the vote wasn’t the end of it.
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