Connect with us

Billionaires

Elon Musk May Bank The Biggest Payday Of His Life During Global Pandemic

Published

on

Tesla Debuts Its New Crossover SUV Model, Tesla X. Justin Sullivan/Getty Images

Elon Musk has achieved remarkable and unexpected things with Tesla TSLA in the 16 years since his electric-car maker debuted its first prototype. Add to that list the likelihood the billionaire entrepreneur is closing in on the last requirements to win a stock jackpot worth $600 million or more–in the middle of what’s shaping up to be the worst economic slump since the Great Depression. 

Six weeks ago, with U.S. stock indices and Tesla shares plunging as the scope of the severity of the COVID-19 pandemic unfolded, the odds Musk would achieve the first tranche of his 12-part $55 billion compensation package looked slim. Yet Forbes now estimates the stock’s 100% rebound from a recent low-point on March 18 has Tesla on track to hit both six-month and 30-day market cap averages of $100 billion in early May. Once that happens, the company’s board would award Musk 1.69 million Tesla shares that, factoring in an exercise price of $350.02 share, would have a net value of at least $600 million. Tesla’s rebound far outpaced the 18% increase in the S&P 500 and GM’s 30% rise since March 18.

Musk’s compensation package runs through 2028 and was unveiled more than two years ago, well before the current health crisis. A review of it by The New York Times NYT in January 2018 called it the “boldest pay plan in corporate history.” Never one to think small, Musk told the paper: “I actually see the potential for Tesla to become a trillion-dollar company within a 10-year period.”

Certainly, the timing of the award is awkward. Tesla’s South African-born CEO and cofounder, with a net worth Forbes estimates at $40 billion as of April 27, would be getting the biggest payday of his life at a time of widespread economic turmoil and job loss across the U.S. and major developed economies. More than 26 million Americans have filed unemployment claims in the past six weeks of the coronavirus shutdown, which in turn appears likely to trigger a recession and a continued, unprecedented level of Federal spending. Tesla itself implemented across-the-board pay cuts for all employees and furloughed thousands of U.S. factory workers.

“This is like Marie Antoinette telling the peasants to eat cake if there is no bread. Still, Musk has never been troubled about appearances and may feel that he earned it,” says Columbia Law School Professor John Coffee.

The electric-car maker’s shares rose 10% to $798.75 in Nasdaq NDAQ trading Monday, boosting its market cap to $147 billion. The daily increase boosted Musk’s wealth by $2.6 billion, the biggest gain among billionaires tracked by Forbes.

Tesla’s average market capitalization is $95.5 billion, from Oct. 25, 2019, through April 24, based on data from S&P Global Capital IQ. The Palo Alto, California-based company’s 30-day average market cap is $104 billion. If the share price stays at its trailing 10-day average of $718.57 for eight more sessions, the six-month average market cap would be achieved by the trading close on May 6.

A Delaware judge ruled in September that Tesla’s board must defend Musk’s compensation package in a suit brought by a shareholder. Vice Chancellor Joseph Slights of the Delaware Court of Chancery rebuffed Tesla’s request to dismiss the lawsuit by shareholder Richard Tornetta, which says it unjustly enriched Musk.

Tesla reports first-quarter earnings on April 29, after the close of regular market trading. If it tops consensus expectations, which Barclays equity analyst Brian Johnson sees as a possibility, that could propel the stock even higher. 

“While consensus has drifted down to a 32c loss for 1Q, no doubt due to lower than ingoing deliveries and the likely ramp costs in China, we would not rule out a non-GAAP profit for 1Q20, which (on top of the recent stock price rise) would add further fuel to the bull narrative that Tesla is set to dominate global automaking,” Johnson said in a recent report. He also noted that Musk would likely achieve the performance target in early May, increasing the odds of a new fundraising round by Tesla in the weeks ahead. Johnson estimates Tesla will report adjusted earnings per share of 61 cents for the quarter that ended on March 31.

Currently, Tesla’s main U.S. auto plant in Fremont, California, is idle owing to the coronavirus shutdown, though its new Gigafactory in Shanghai that opened in January is ramping up production of Model 3 sedans. The company, which briefly defied a local ordinance in Fremont to stop making cars last month, may call some workers back as early as April 29, Bloomberg reported. Tesla has told employees it wants to restart production at Fremont by May 4.

Much larger payouts to Musk will come in the form of 11 additional awards of 1.69 million Tesla shares, assuming he meets ever-larger targets for market cap, revenue and adjusted profit through 2028. If he falls short in a particular period, he gets nothing. To receive the maximum payout of 20.3 million shares, Tesla’s market cap must hit $650 billion, more than five times the current level. Annual revenue from Tesla’s electric vehicles, batteries and solar panels has to be $175 billion, with adjusted earnings of $14 billion. 

Tesla

Tesla said in its annual report on Feb. 13 that Musk fulfilled “two operational milestones,” with annual revenue of $24.6 billion in 2019 and annual adjusted pre-tax earnings of at least $1.5 billion. At that time, “no market capitalization milestones have been achieved,” the company said.

It’s not a problem that the market cap goals are likely to occur months after a fiscal year, Tesla said in a 2018 SEC filing. “A Market Capitalization Milestone and an Operational Milestone that are matched together can be achieved at different points in time and vesting will occur at the later of the achievement certification dates for such Market Capitalization Milestone and Operational Milestone.” 

Alan Ohnsman, Forbes Staff, Transportation

Billionaires

The World’s 25 Richest Billionaires Have Gained Nearly $255 Billion In Just Two Months

Published

on

By

THE CHANGING FORTUNES OF THE WORLD’S RICHEST

The super rich are a whole lot richer than they were two months ago. Twenty five of the wealthiest people on Forbes’ list of the world’s billionaires are worth a whopping $255 billion more than when the U.S. stock market hit a mid-pandemic low on March 23. 

Together these 25 folks–Forbes looked at just those on the list with fortunes tied to public stocks–are worth nearly $1.5 trillion, which is about 16% of the total wealth held by the world’s billionaires.

Facebook CEO Mark Zuckerberg is the biggest dollar gainer among this rarified group. Facebook shares surged nearly 60% over the past two months, hitting a record high on Friday May 22.  Investors responded positively to the Wednesday debut of Shops, Facebook’s effort to host digital storefronts for small business owners. Zuckerberg, now worth $86.5 billion, has become the fourth-richest person in the world, up from the No. 7 richest on Forbes’ 2020 list of the World’s Billionaires, published in early April. The 36-year-old is now richer than Warren Buffett, Inditex founder Amancio Ortega and Oracle cofounder Larry Ellison.

The second-largest gainer in dollar terms is also the world’s richest man, Amazon founder and CEO Jeff Bezos. Shares of the ecommerce giant have continued on a tear amid increased demand since coronavirus shuttered physical retailers. Amazon stock is up 29% since March 23. As of the end of the day Friday, Bezos was worth $146.9 billion, up $30 billion and 26% since March 23. 

The biggest percentage gainer is Colin Zheng Huang, the founder of China’s second largest online marketplace (behind Alibaba), Pinduoduo. Boosted by the firm’s social shopping model, in which users share purchases with friends and family, and an aggressive campaign offering subsidized deals to consumers, Pinduoduo’s shares have nearly doubled since March 23, and Huang, its 40-year-old founder and CEO, has added $17.9 billion to his fortune; he’s now China’s third-richest person, worth $35.6 billion.

Colin Huang, chief executive officer and founder of Pinduoduo, poses for a photograph at the company’s office in Shanghai, China, on Friday, Feb. 24, 2017. Pinduoduo, or PDD, is a kind of Facebook-Groupon mashup that Huang believes could revolutionize e-commerce. Photographer: Qilai Shen/Bloomberg via Getty Images

Another notable gainer: Mukesh Ambani, who became Asia’s richest person in April after Facebook announced a $5.7 billion investment into Mumbai-based Reliance Jio, a telecom subsidiary of the sprawling conglomerate founded by Ambani’s late father. The company has since raised loads more, including $1.5 billion from private equity giant KKR on Friday and $750 million from investment firm Silver Lake earlier this month. All told, the firm has raked in $10 billion of fresh capital in less than one month. Ambani is now worth $52.7 billion, up nearly $20 billion since the market trough. 

Billionaires with net worths tied to stakes in technology companies have led the way for gains amid the pandemic. The tech-heavy Nasdaq composite index turned positive for the year earlier this month, and it’s up 37% since March 23. The S&P 500 and Dow Jones, meanwhile, are up about 31% each–still down roughly 10% and 15% for the year, respectively. 

FAYETTEVILLE, AR – JUNE 1: Members of the Walton family (L-R) Rob, Alice and Jim speak during the annual Walmart shareholders meeting event on June 1, 2018 in Fayetteville, Arkansas. The shareholders week brings thousands of shareholders and associates from around the world to meet at the company’s global headquarters. (Photo by Rick T. Wilking/Getty Images)

Not a single top 25 fortune has fallen since March 23. The fortunes of JimAlice and Robert Walton, for example, grew the least percentage-wise, but they’re still up $3.6 billion each. Walmart shares hit an all-time high in mid-April after the first round of stimulus checks made their way to American bank accounts, and they’ve managed to stay near their peak. On Tuesday, the firm reported quarterly revenue that surged almost 10% to $134.6 billion, boosted by a 74% increase in online sales. Combined, the three billionaire Walmart heirs are worth close to $165 billion.

The figures stand in stark contrast to those at the other end of the wealth spectrum. In the U.S. total unemployment claims have risen to 39 million since mid-March, affecting about a quarter of the U.S. labor force.


HERE’S HOW MUCH THE WORLD’S 25 RICHEST BILLIONAIRES HAVE GAINED OVER THE PAST TWO MONTHS.

The net worth change is from Monday, March 23, to Friday, May 22.

1 | JEFF BEZOS

NET WORTH | $146.9 BILLION, UP $29.9 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | AMAZON

25 September 2019, US: Jeff Bezos, head of Amazon, can be seen on the fringes of the company’s novelties event. Photo: Andrej Sokolow/dpa (Photo by Andrej Sokolow/picture alliance via Getty Images)

2 | BILL GATES

NET WORTH | $106.5 BILLION, UP $11.9 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | MICROSOFT


3 | BERNARD ARNAULT

NET WORTH | $94.1 BILLION, UP $12.8 BILLION

COUNTRY | FRANCE

SOURCE OF WEALTH | LVMH


4 | MARK ZUCKERBERG

NET WORTH | $86.5 BILLION, UP $31.4 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | FACEBOOK


5 | WARREN BUFFETT

NET WORTH | $69.2 BILLION, UP $6 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | BERKSHIRE HATHAWAY


6 | LARRY ELLISON

NET WORTH | $66.4 BILLION, UP $10.4 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | SOFTWARE


7 | STEVE BALLMER

NET WORTH | $65.4 BILLION, UP $14 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | MICROSOFT


8 | LARRY PAGE

NET WORTH | $63.6 BILLION, UP $14.2 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | GOOGLE


9 | SERGEY BRIN

NET WORTH | $61.3 BILLION, UP $13.7 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | GOOGLE


10 | AMANCIO ORTEGA

NET WORTH | $60.5 BILLION, UP $5.2 BILLION

COUNTRY | SPAIN

SOURCE OF WEALTH | ZARA


11 | JIM WALTON

NET WORTH | $55.2 BILLION, UP $3.6 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | WALMART


12 | ALICE WALTON

NET WORTH | $55 BILLION, UP $3.6 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | WALMART

PHOTOGRAPH BY TIM PANNELL/THE FORBES COLLECTION

13 | ROB WALTON

NET WORTH | $54.8 BILLION, UP $3.6 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | WALMART



14 | FRANCOISE BETTENCOURT MEYERS

NET WORTH | $54.2 BILLION, UP $6.4 BILLION

COUNTRY | FRANCE

SOURCE OF WEALTH | L’OREAL


15 | MUKESH AMBANI

NET WORTH | $52.7 BILLION, UP $19.9 BILLION

COUNTRY | INDIA

SOURCE OF WEALTH | OIL & GAS, PETROCHEMICALS

Mukesh D. Ambani, chairman of Reliance Industries Ltd., attends the World Economic Forum India Economic Summit 2011 in Mumbai, India, on Sunday, Nov. 13, 2011. The annual summit shifted to the country’s financial capital this year after being held in Delhi for 26 years. Photographer: Adeel Halim/Bloomberg via Getty Images

16 | CARLOS SLIM HELU

NET WORTH | $51.2 BILLION, UP $4.2 BILLION

COUNTRY | MEXICO

SOURCE OF WEALTH | TELECOM


17 | MACKENZIE BEZOS

NET WORTH | $47.8 BILLION, UP $10.4 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | AMAZON


18 | MA HUATENG

NET WORTH | $46.4 BILLION, UP $6.8 BILLION

COUNTRY | CHINA

SOURCE OF WEALTH | INTERNET MEDIA


19 | JACK MA
NET WORTH | $41.3 BILLION, UP $3 BILLION
COUNTRY | CHINA
SOURCE OF WEALTH | E-COMMERCE


20 | PHIL KNIGHT
NET WORTH | $37.7 BILLION, UP $9.9 BILLION
COUNTRY | UNITED STATES
SOURCE OF WEALTH | NIKE

SUN VALLEY, ID – JULY 14: Phil Knight, co-founder and chairman emeritus of Nike, attends the fourth day of the annual Allen & Company Sun Valley Conference, July 14, 2017 in Sun Valley, Idaho. Every July, some of the world’s most wealthy and powerful businesspeople from the media, finance, technology and political spheres converge at the Sun Valley Resort for the exclusive weeklong conference. (Photo by Drew Angerer/Getty Images)

21 | ELON MUSK

NET WORTH | $36.7 BILLION, UP $9.5 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | TESLA MOTORS, SPACEX


22 | COLIN ZHENG HUANG

NET WORTH | $35.6 BILLION, UP $17.9 BILLION

COUNTRY | CHINA

SOURCE OF WEALTH | E-COMMERCE


23 | FRANCOIS PINAULT

NET WORTH | $31.8 BILLION, UP $2.1 BILLION

COUNTRY | FRANCE

SOURCE OF WEALTH | LUXURY GOODS


24 | SHELDON ADELSON

NET WORTH | $30.7 BILLION, UP $1.4 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | CASINOS


25 | MICHAEL DELL

NET WORTH | $28.3 BILLION, UP $3.5 BILLION

COUNTRY | UNITED STATES

SOURCE OF WEALTH | DELL COMPUTERS


Jonathan Ponciano, Forbes Staff, Billionaires

Continue Reading

Billionaires

How This Billionaire-Backed Crypto Startup Gets Paid To Not Mine Bitcoin

Published

on

By

It’s everyone’s dream to get paid to do nothing. Bitcoin miner Layer1 is turning that dream into reality — having figured out how to make money even when its machines are turned off. 

Layer1 is a cryptocurrency startup backed by the likes of billionaire Peter Thiel. In recent months, out in the hardscrabble land of west Texas, the company has been busy erecting steel boxes (think shipping containers) stuffed chockablock with high-end processors submerged inside cooling baths of mineral oil. Why west Texas? Beause thanks to a glut of natural gas and a forest of wind turbines, power there is among the cheapest in the world — which is what you need for crypto. 

“Mining Bitcoin is about converting electricity into money,” says Alex Liegl, CEO and co-founder. By this fall Layer1 will have dozens of these boxes churning around the clock to transform 100 megawatts into a stream of Bitcoin. Liegl says their average cost of production is about $1,000 per coin — equating to a 90% profit margin at current BTC price of $9,100. 

So it’s odd how excited Liegl is about the prospect of having to shut down his Bitcoin miners this summer. 

Already this year west Texas has seen a string of 100-degree days. But the real heat and humidity don’t hit until August, which is when the Texas power grid strains under the load of every air conditioning unit in the state going full blast. During an intense week in 2019, wholesale electricity prices in the grid region managed by the Electricity Reliability Council of Texas (ERCOT) soared from about $120 per megawatthour to peak out at $9,000 per mwh. It was only the third time in history that Texas power hit that level. And although the peak pricing only lasted an hour or so, that’s enough to generate big profits. Analyst Hugh Wynne at research outfit SSR figures that Texas power generators make about 15% of annual revenues during the peak 1% of hours (whereas in more temperate California grid generators only get 3% of revs from the top 1%).

Turns out that running a phalanx of Bitcoin miners is a great way to arbitrage those peaks. Layer1 has entered into so-called “demand response” contracts whereby at a minute’s notice they will shut down all their machines and instead allow their 100 mw load to flow onto the grid. “We act as an insurance underwriter for the energy grid,” says Liegl, 27. “If there is an insufficiency of supply we can shut down.” The best part, they get paid whether a grid emergeny occurs or not. Just for their willingness to shut in Bitcoin production, Layer1 collects an annual premium equating to $19 per megawatthour of their expected power demand — or about $17 million. Given Layer1’s roughly $25 per mwh long-term contracted costs, this gets their all-in power price down 75% to less than 1 cent per kwh (just 10% of what residential customers pay). 

It may seem like grid operators are paying Layer1 a lot for something that might not even happen, especially with coronavirus reducing electricity demand, but it makes total sense, says Ed Hirs, a lecturer in energy economics at the University of Houston and research fellow at consultancy BDO: “It’s a lot cheaper option than building a whole new power plant or battery system just to keep it on standby.” 

And although this may be a new concept for cryptocurrency miners, it’s been done before. Two decades ago industrialist Charles Hurwitz bought up power-hogging aluminum smelters in the Pacific Northwest and made more money reselling electricity than making metal. “It used to be called load management,” says Dan Delurey, a consultant with Wedgemere Group. “In old commercial buildings you might still find telephone wires connected to air conditioning systems so that grid operators could send a signal to shut off.” More recently we’ve seen companies install radio-based devices to control hot water heaters and lighting systems. Indeed, grid management is a hot enough area that in 2017 Italy’s power giant Enel bought Boston-based Enernoc for $250 million and Itron ITRI bought Comverge for $100 million. What’s emerged are entities, like Layer1, that Delurey calls the “prosumer” — producing consumer. 

As for Layer1, Liegl says his next step is to vertically integrate into financial products, including Bitcoin derivatives and more. “We are building an in-house energy trading division to leverage this into being a virtual power plant.” 

His message to any pikers still trying to mine cryptocurrencies from their bedroom PC or even via cloud services: “I can’t think of something more irrational at this point. It’s like if I wanted to dig a hole in my backyard and try to get oil out of the ground.” 

Christopher Helman, Forbes Staff, Energy

Continue Reading

Billionaires

Jeff Bezos ‘Trillionaire’ Is Trending On Twitter. Here’s Why

Published

on

By

TOPLINE Jeff Bezos’ wealth suddenly caught Twitter’s attention on Wednesday amid ‘claims’ that the world’s richest man is set to become a trillionaire, in part thanks to pandemic-driven demand that has sent Amazon stock soaring.

KEY FACTS

  • Bezos was trending on Twitter on Wednesday after a months-old study by small business advice platform, Comparisun, resurfaced, claiming that Bezos net worth could reach $1 trillion by 2026.
  • The company analyzed the market cap of the highest valued firms on the New York Stock Exchange, as well as Forbes’ 25 richest people. Chinese real estate billionaire Xu Jiayin is second on the study’s list.
  • But Bezos has a long way to go to become the world’s first trillionaire. At the time of publication, Forbes values the 56-year-old’s net worth to be $143 billion. He owns a 11.2% stake in Amazon, and his wealth has surged upwards from around $125 billion in March.
  • Amazon is predicted to be one of the winners of the pandemic as demand for online shopping, streaming and delivery services flies.
  • Sales in the first three months of the year topped $75 billion, up from $60 billion in 2019. The potential for a second wave of the virus and further lockdowns could keep that demand high.
  • Bezos joined Forbes’ list of 400 richest Americans in 1998, four years after he founded Amazon, and had a net worth of $1.6 billion at the time.

KEY BACKGROUND

Amazon AMZN shares are up more than 28% so far this year. But the company is now up against “the hardest time” it has ever faced, Bezos said in April. The company predicted operating profits of $4 billion in the three months to June, but is now committing that entire amount to “COVID-related expenses” such as higher wages for hourly teams, buying up personal protective equipment for staff, and developing coronavirus testing facilities.

The company has been under fire from former employees—both office staff and warehouse workers—for allegedly silencing them after they spoke out about a lack of protection against the virus. Amazon has let go a number of employees, claiming that they breached company policy. 

TANGENT

In February, Bezos pocketed $3.1 billion after selling $4 billion worth of Amazon shares since January.

Isabel Togoh, Forbes Staff, Business

Continue Reading

Trending