[00:01] members, but for now, let's talk about Elon. >> Well, I have to say this level of a shy stirring was not on my bingo board for Tesla and SpaceX. Obviously, we have been talking about the potential for a
[00:15] merger between the companies for a long time. And we just found out that time. And we just found out that apparently all of the stock comp service-based milestones that Elon promised can basically get waived in the
[00:33] event of a merger. Literally, the approved milestones that shareholders voted on at Tesla, which say that, "Hey, we want Tesla to hit a say that, "Hey, we want Tesla to hit a certain market cap and service-based
[00:47] including 10 million active FSD subscriptions. We're currently at 1.48 million as of the second quarter. 55% of those people bought up front, so only around 700-ish thousand are actually paying on a
[01:02] monthly basis, right? We're supposed to get to 10 million. We're a fraction of the way there, about 14% of the way there. Looking for 20 million cumulative vehicle deliveries, we're almost halfway there at about 9.7 million. Looking for
[01:15] there at about 9.7 million. Looking for 1 million robotaxis in operation, we're at 20 unsupervised. It's trying to get there. It's taking a little longer than expected, but we're working on it. 1 million Optimus robots
[01:28] delivered, obviously this is zero for, you know, commercial purposes. market-cap-based milestones, which of those will survive. But every single one of those milestones, Optimus, robotaxi, cumulative vehicle deliveries, FSD
[01:44] subscriptions, all of those vanish as a stock comp in the event of a merger between Tesla and SpaceX. And that is between Tesla and SpaceX. And that is due to this particular clause on
[01:58] it's actually on page four over here of the way I printed the stock comp plan. Some people have printed this to indicate it's on page 16. For me, it's on page five. I don't know. But, take a
[02:10] This is the document here. So, you can see this is the 2025 CEO Performance Award Agreement for Tesla. 2025 CEO Performance Restricted
[02:22] Stock Agreement. You can see here September 3rd, 2025. Tesla agrees to shareholders voted on, right? If we go down, these are the market caps, by the way. You can see right here. And they come with operational
[02:37] milestones in addition to market cap, right? So, the first tranche, $2 trillion market cap for Tesla. That's on a 30-day like weighted moving average going back. So, it's not just like it's there for a
[02:50] moment. It has to be there for a good month, approximately. Uh but, you would then have to achieve one of the 12 operational milestones. I just gave us some of them. Uh you can see here, this is what I listed. 20
[03:06] million FSD subscriptions, the 1 million bot deliveries, the 1 million robotaxis, uh any of the following, which are basically increments of billions of
[03:18] dollars of adjusted EBITDA. Okay. So, in other words, uh without any actual earnings requirements, you could basically get all the way to
[03:30] operational milestone number four right here solely based on market cap without hitting any kind of earnings, right? But, in the event of a merger,
[03:42] But, in the event of a merger, all of this right here is stricken. None of these matter. There's only one thing that matters. The only thing that matters for how much Elon gets paid is this section right here. Let's make
[03:56] is this section right here. Let's make it a box. That's it. Market cap. Which given that SpaceX is controlled by Elon is controlled by Elon and SpaceX would be presumed to buy
[04:10] Tesla, Elon can basically decide uh which >> [laughter] >> do you want to get paid at on, right? Now, of course, that is assuming that uh the market cap for
[04:24] Tesla rises and in order to actually afford this at SpaceX without being uh you would assume that SpaceX would have to really grow in market cap substantially, which you know, it can do. But, where the clause is buried is
[04:38] And again, the print formatting can kind of move this around a little bit. Right here. Notwithstanding section one, two, and three above. So, one, two, three uh above just for uh reference, that's
[04:52] achievement of operational milestones. So, basically, how they determine cap. This is where the part of the 30-day market cap is, blah blah blah.
[05:04] actual milestones. So, so just basically, ignoring all of that for a moment, in the event of a change in control, all of the operational milestones above shall literally be disregarded
[05:21] and the market capitalization shall basically be what was the price immediately before the acquisition or the change in So, in other words, hey, if Tesla
[05:38] uh gets some kind of really large premium offer, right? This is what the today, which you know, some people don't like the Wall Street basically making this argument that, "Hey, you know, Elon could do a $2
[05:53] trillion acquisition, which would be about $506 per share over at Tesla." And Tesla SpaceX merger gives Musk a shortcut to his trillion-dollar payday."
[06:06] different scenarios of prices and all this. I think this is a little article. But basically, if there's a a $2 trillion acquisition price for Tesla, which would
[06:21] be a 53% premium to today's pricing, then Elon would be able to unlock his first tranche immediately regardless of whether or not a single one of those operational milestones has actually been
[06:36] So, if if Elon does acquire Tesla for $2 trillion at about $506 per share, Elon would be granted about $17.9 billion
[06:49] before tax in stock options. Now, $17.9 billion isn't really the play Now, $17.9 billion isn't really the play here. $17.9 billion for somebody who's a trillionaire isn't a big deal. That's like a $20 bill when you have $1,000 in
[07:05] your bank account. I mean, you still want the 20, but it's a rounding error compared to the about 12.7% stake you have in Tesla. See, at $2 trillion, a 12.7%
[07:21] stake at $2 trillion works out to about $250 $250 billion. So, in other words, the higher the share price is for Tesla at acquisition by SpaceX, the more money
[07:37] Elon makes from Stock Comp without operational milestones, without operational milestones, and the more money that his actual Tesla ownership is worth which then just translates into more SpaceX stock.
[07:51] So, what does this mean? In my opinion, this what does this mean? In my opinion, this is again brilliant optionality by Elon though it's kind of evil because it's not what shareholders really intended to
[08:03] vote on. Uh but I don't think people would be pissed if their shares get sold for $500 or some crazy premium, right? So, it's sort of like it's a nuanced ah good one Elon. We see what you did there but we still like the fact that
[08:17] we're getting paid a premium for the shares. The people who potentially get screwed are really the other SpaceX shareholders which which which I am >> [laughter] >> Uh so,
[08:29] because if you pay too much of a premium for Tesla and it operational milestones, then this really fat premium at Tesla to
[08:41] appreciated shares based on their own purchase price to allow him to move those into SpaceX ownership to increase his SpaceX ownership at a high Tesla his SpaceX ownership at a high Tesla valuation is good for him but not good
[08:55] for SpaceX shareholders. So, that's the built-in risk factor here. But this is I have to say is brilliant but it's also shystery. This is not, in my opinion, what people thought they were voting for when they
[09:11] voted for the stock comp plan. I think people are like, "Hey man, like if Tesla period of, you know, 30 days or whatever, hit those milestones and we can hit some of these operational milestones, fine. Let the guy be paid.
[09:25] Let the man make his money. If he makes everybody else money and he actually grows the business to where it's a good business that's going into SpaceX which is then good and accretive to Tesla share well, maybe not accretive but it's
[09:37] it's beneficial to SpaceX shareholders. Great. Let the man make his money. But, this kind of perverses the incentives a little bit. Really, what incentives a little bit. Really, what you're doing is you're saying, "Hey,
[09:51] premium for Tesla, even though it's not hitting any of its massive you know, it's operational milestones, oh, well, we're still going to do the merger and we're still going to take our stock hump
[10:04] we're still going to take our stock hump and our inflated ownership of SpaceX." it. And if any of that makes you nervous, don't worry, come join us over
[10:16] We just sent out another buy alert. Talk to you soon. Goodbye and good luck. told us here? I feel like nobody else knows about this. >> Congratulations, man. You have done [music] so much. People love you. People
[10:30] >> Kevin Paffrath there, financial analyst and YouTuber, Meet Kevin. Always great and YouTuber, Meet Kevin. Always great to get your [music] take.