Australia markets closed

    +7.50 (+0.10%)
  • ASX 200

    +16.00 (+0.22%)

    -0.0090 (-1.27%)
  • OIL

    -0.28 (-0.42%)
  • GOLD

    +21.20 (+1.20%)

    -16,113.83 (-19.83%)
  • CMC Crypto 200

    -74.62 (-5.18%)

    -0.0087 (-1.39%)

    -0.0028 (-0.27%)
  • NZX 50

    +6.26 (+0.05%)

    -278.72 (-1.74%)
  • FTSE

    -6.89 (-0.10%)
  • Dow Jones

    -59.71 (-0.17%)
  • DAX

    -93.13 (-0.61%)
  • Hang Seng

    -22.24 (-0.09%)
  • NIKKEI 225

    +276.20 (+1.00%)

This man is on track to become world’s richest person: Here's how

  • Oops!
    Something went wrong.
    Please try again later.
·4-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
Silhouette of young man standing against urban cityscape and harbour looking up to sky in deep thought
Jeff Bezos could be toppled. Image: Getty

Billionaire entrepreneur Elon Musk is on track to become the world’s richest person within weeks thanks to Tesla’s (TSLA) rocketing performance.

His wealth surged throughout February, notching an impressive US$4.5 billion (AU$6.7 billion) jump in just one day on 4 February, now sitting on a net worth of US$40.2 billion, according to Forbes’ real time calculator.

As recently as October, his net worth was US$19.9 billion, making Musk the billionaire with the fastest-growing wealth in the world. He’s also risen in the Bloomberg billionaire index from 35 to 24, with his wealth growing US$13.9 billion in six weeks.

That means he’s added an average US$316 million to his wealth every day in 2020 so far.

That’s nuts. What’s going on?

Tesla CEO Elon Musk introduces the Cybertruck at Tesla's design studio Thursday, Nov. 21, 2019, in Hawthorne, Calif. Musk is taking on the workhorse heavy pickup truck market with his latest electric vehicle. (AP Photo/Ringo H.W. Chiu)
Elon Musk needs to meet increasingly difficult demands to qualify for the huge payday. Image: AP Photo

Good question.

In order for Musk to be crowned the world’s richest man, he’ll need to beat Jeff Bezos who has a net worth of US$130.7 billion.

So how close is Musk to doing that? Closer than ever, thanks to a combination of factors.

For starters, Musk doesn’t earn a paycheck or cash bonuses and instead receives options, dependent on Tesla’s success.

Part of those goals is Tesla’s market capitalisation. If Tesla maintains a market capitalisation of US$100 billion for six months, Musk will be eligible to receive options to purchase 1.7 million Tesla shares.

Tesla crossed the US$100 billion threshold on 22 January and continues to increase. At time of writing, Tesla’s market capitalisation was US$144.91 billion.

This huge growth means that if Musk can ensure Tesla maintains its stock price of US$767.29 for the next few months, Tesla will have achieved an average value of US$100 billion over that required six month period.

And if he does that, Musk is in line to receive the first tranche of options by mid-April.

Over the longer term, Musk is ultimately eligible to receive up to 12 batches of stock options, with the full package of options unlocked should Tesla reach a market capitalisation of US$650 billion within the next eight years.

Jeff Bezos headshot, Amazon founder and CEO, graphic element on gray
Jeff Bezos is the world's richest man. Image: Getty

While that figure is huge, Tesla’s market capitalisation has more than doubled from the US$54.6 billion it was worth when the deal was struck in March 2018. To achieve the full payout, he’ll need to keep Tesla’s value growing by US$50 billion every 10 months.

If it actually hit US$650 billion, that value would put Tesla up there with Google, Amazon and Microsoft, and make Musk eligible for more than 20 million options. If the company was worth US$650 billion, those shares would be worth US$3,606.20 each. And if he sold those shares, he’d be a huge US$66 billion richer.

On top of that, Musk already owns 39 million Tesla shares. If they all grew to US$3,606.20 a share, he’d already be the richest person alive, without even considering the other US$66 billion.

In fact, the two sums together would see Musk with a net worth of more than US$200 billion.

That’s a lot of ifs. How likely is this?

SpaceX founder Elon Musk addresses the media during a press conference announcing new developments of the Crew Dragon reusable spacecraft, at SpaceX headquarters in Hawthorne, California on October 10, 2019. (Photo by Philip Pacheco / AFP) (Photo by PHILIP PACHECO/AFP via Getty Images)
Elon Musk will need to keep his Twitter in line. Image: Getty

There are a number of other things to take into account: first of all, Tesla will need to maintain its current valuation.

And, the company’s value will need to more than quadruple, while Musk will also need to factor in the likelihood of the company making more shares available to staff and diluting the value of the ones he stands to hold.

A Tesla filing makes that point explicit: “It is not possible to reliably estimate the value that could be realized under the CEO Performance Award because that value depends on the amount of dilution that Tesla experiences over the course of the 10-year term of the award,” the filing reads.

“The more dilution, the less value that Mr. Musk will realise.”

Musk’s worst enemy could even be himself: Tesla shares shuddered 7 per cent lower in October 2018 after the entrepreneur sent out a tweet describing the Securities and Exchange Commission (SEC) as the “Shortseller Enrichment Commission”.

The tweet came after he and the SEC had come to an agreement that barred him for acting as chairperson of Tesla, following different tweets he sent suggesting he may take the company private. As part of the deal, the company was also to monitor Musk’s tweets.

But if he can keep his Twitter in line, and Tesla’s value growing, Jeff Bezos had better watch his back.

Make your money work with Yahoo Finance’s daily newsletter. Sign up here and stay on top of the latest money, news and tech news.

Follow Yahoo Finance Australia on Facebook, Twitter, Instagram and LinkedIn.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting