Thread by @jpr007

WHO IS THE WORLD's RICHEST MAN ?

Random observers point to Elon Musk as the "World's Richest Man"

But in my personal view we should consider him to be the "World's Poorest Man"

- at least in Cash terms

He has no Cash and owes something like $500 million of Debt

@elonmusk

But "Ah" you say, "he owns all those shares in Tesla !"

Well, no he doesn't

For the most part, he owns some worthless pieces of paper called stock options

- which he cannot sell to anyone else

And those are not worth anything close to what most people think they are worth

"Really ?" you say . . .

Yes, really

Naturally you doubt me, so let's take a look at it together, using some illustrative numbers

Are you ready ?

Imagine that Mr Musk is holding stock options for 1 million shares today

- and they are going to expire in a few months

- at which time they would become truly worthless

With the stock price at $800 per share you might think those little pieces of paper are worth $800 million

And perhaps they are . . .

. . . but not to Mr Musk

He will have to pay $70 per share to Tesla to exercise those stock options, as that is the strike price

Tesla Cash = +$70 million

Mr Musk Cash = -$70 million

And he will have to pay taxes on the $730 million difference between the stock price of $800 per share minus the strike price of $70 per share

IRS Cash = +$270 million = 37.0%

State of California Cash = +$97 million = 13.3%

Mr Musk Cash = -$367 million

Mr Musk does not have any Cash

So he must borrow $70 million + $367 million more to pay these amounts

Which will increase his Debt to something like $937 million

So the "Poorest Man In The World" just got $437 million poorer

But "Ah" you say, "now he owns those 1 million new shares. And those are worth $800 million"

OK

And he will probably have to sell them to pay down his Debt to the Banks

Mr Musk Cash = +$800 million from sale of the shares

Mr Musk Cash = -$800 million to pay down his Debt

Bank Cash = +$800 million

Mr Musk's Debt would then be -$137 million

He would no longer own those 1 million shares

He would still have no Cash

And he would still owe $137 million of Debt to Big Banks

And this puts his other shares at risk

- which he has clearly stated that he does not want to sell

Do you really want to change places with him in exchange for taking on $137 million of Debt ?

So to summarise :

For every 1 million of shares represented by stock options :

- Face Value = $800 million

- Payment of $70 Strike Price = $70 million --> Tesla

- Payment of Taxes on $730 = $367 million --> IRS + CA

If he sells all the shares earned, he would receive $800 million Gross in Cash

But it only gives him $343 million Net in Cash

Basically this could just go to paying down his existing Debt secured by his other shares

- which is something like $500 million

Not much of a payday for Mr Musk

But a huge Income Event for the IRS and the State of California