Transcription
D musk is interesting because he's a risk taker. He negotiated with the investors and the board that I want to get paid not with a salary. I want to get paid with stock options.
A stock option gives you the right to buy that stock. He was awarded these Tesla stock options at about $6 a share. Which means if the Tesla stock goes up to $7 a share, he could sell the stock option for $6 and profit $1 for each stock option.
Now he was giv millions and millions and millions of these stock options. And so now when the Tesla stock goes up to $100 a share, now he is rich on paper. He doesn't have any money in his bank. He hasn't gotten a salary, so he has no taxable income because he hasn't actually received any money. He has the option to sell this stock for $6 and in return get $100, so net $94. But if he sold that stock, he would have $94 of income. Now have a tax cuz you have taxable income.
So instead what he does is he goes to the bank and he says, "Hey bank, I have these millions and millions of stock options that are worth billions of dollars. Would you like to loan me a million dollars, $10 million, $100 million at three, four, or 5% interest?" No bank is going to say no because the collateral is so valuable. The collateral is the company. It's his assets, the stock options.
So then he gets, let's call it a $10 million loan from the bank. Now he has $10 million in his bank account, but it's not an income. It's debt. Debt is not taxed. If you go out and get a mortgage for a half a million dollars, you're not taxed. If you do a cash out refinance, you're not taxed because that's debt.
So now he gets this $10 million of loans that he can spend to buy a house, to buy a car, to buy food, to buy vacation, to buy whatever you want to buy. Twitter. To buy Twitter and pay no money in taxes. And it's 100% legal.