Elon Musk officially exercises 2018 Tesla compensation options, with an unrealized gain of $116 billion

According to Form 4 and Schedule 13G filings submitted to the SEC by Tesla on June 17, Elon Musk officially exercises all options under the 2018 CEO compensation plan, acquiring 303,960,630 shares at an exercise price of $23.34 per share.

Based on Tesla’s closing price of $404.66 on that day, the paper profit is approximately $116 billion, making it one of the largest equity cash-out events in corporate history.

The exercise did not involve any sale of shares in the public market. Instead, it was carried out via a “net settlement” method: Tesla withheld 17,531,857 shares with a value of approximately $7.1 billion to cover the exercise cost, and Musk ultimately received 286,428,773 net newly issued shares.

However, these shares are also subject to restrictions. They will only vest if service conditions are met until January 19, 2028, and cannot be sold before then. This means that although Musk has obtained a large number of shares, he cannot trade them in the short term.

This exercise marks the official end of a legal dispute that lasted six years. The Delaware Court of Chancery had overturned the compensation plan in 2024, but the Delaware Supreme Court overturned that decision in December 2025, ruling that a complete revocation was too extreme.

Entering 2026, Tesla’s board signed an implementation agreement in April for it to take effect. Musk issued an exercise notice on June 9 and plans to complete the transaction within a five-trading-day window.

Because these options are non-qualified stock options, the approximately $116 billion paper gain will be taxed at ordinary income tax rates (the federal top rate of 37%, plus the Medicare surtax), and the estimated federal tax bill is about $45 billion.

While Musk, as a Texas resident, is not subject to state income tax, the federal tax timing still has uncertainties. Since the shares are restricted until 2028, unless he chooses early taxation, the tax burden may be deferred until vesting.

For shareholders, Musk’s exercise under this plan and the 2025 award further solidify his roughly 20% voting control of Tesla. How he will then raise these hundreds of billions of dollars in taxes (or resolve it through borrowing) will become the focus of market attention going forward.

#马斯克 # compensation options