Tesla CEO Elon Musk put his California houses on the market this year while he was sparring with state lawmakers over Covid-19 restrictions. He’s simultaneously been expanding operations in Texas and cozying up to Republican Gov. Greg Abbott.
Now, several of his close friends and associates say that Musk has told them he’s planning to move to the Lone Star State. The people with knowledge of his plans asked not to be named because their conversations were private.
Musk, the world’s second-wealthiest person behind Amazon’s Jeff Bezos, is in Texas frequently already. He spends most of his time between Austin, where Tesla and his tunnel start-up Boring Company have operations, and a coastal village called Boca Chica, home to a SpaceX facility. SpaceX started operating in Texas in 2003.
You need only follow Musk on Twitter to see his presence in the state, as he often posts photos and videos from SpaceX’s test and launch site known as the Starship Production Complex.
California, often condemned by the super rich for its high tax rates and stiff regulations, has seen an exodus of notable tech names during the pandemic as companies look to cut costs and prepare for a future of distributed work. Musk has been among the loudest critics this year, comparing the state to a championship sports team that’s become complacent and developed a “winning-for-too-long problem.”
In May, as businesses across California were forced to remain closed because of the pandemic, Musk tweeted that he was moving Tesla’s headquarters and future development from California to Texas and Nevada.
Getting out of California, with the highest income tax in the country, and into Texas, which has no state income tax, could save Musk billions of dollars based on his compensation package awarded in 2018. Musk was granted 101.3 million options (adjusted after a 5-for-1 stock split this year) that vest over time as the company hits certain milestones, including market cap numbers.
Tesla’s stock has surged 782% in the past year. As of October, Musk had earned awards currently worth about $ 20 billion before taxes, based on Thursday’s close, a portion of the potential total.
Imagine no possessions
Nailing down where Musk lives at any given time is a challenge because he claims to be selling all “physical possessions” and tweeted in May that he “will own no house.” Shortly after that, he put several of his California homes up for sale. CNBC was unable to find any public records that suggest he’s officially changed his residence, and the White Pages online database still lists his primary address as Los Angeles.
Even the people who know him well and are aware of his general plans to move to Texas say they don’t know where exactly he stays when he’s there and that he tries to keep those details private.
The state’s top lawmaker, Gov. Abbott, certainly seems to think Musk is making the move.
In July, Abbott said on CNBC’s “Squawk Box” that Musk told him he’d gotten a Texas driver’s license and is a “bona fide Texan now.” Abbott also said Musk was building his next Tesla factory in the state because it would give him the freedom to “expand the way he wanted to expand.” When contacted for this story, a spokesperson for Abbott declined further comment on Musk’s plans.
To help lure Tesla’s new factory, local officials granted the company tens of millions of dollars in property tax breaks. Musk confirmed on the company’s second-quarter earnings call in July that the plant would occupy about 2,000 acres 15 minutes from downtown, and would be used to build the Cybertruck, its Semi, Model 3 and Model Y. Musk said the factory will start delivering cars next year.
In addition to SpaceX and Tesla, Musk’s Boring Company has an office in Texas. Seven of the nascent company’s 17 job openings on its website are for positions in Austin, and Musk has hinted at building a tunnel there. Boring Company investor Joe Lonsdale, a co-founder of Palantir and friend of Musk’s, recently relocated to the Austin area from Silicon Valley.
For now, Tesla’s headquarters is still in Palo Alto, California, and the company continues to build cars in nearby Fremont. SpaceX’s main address is in Los Angeles County at 1 Rocket Road in Hawthorne.
But Musk’s personal financial reasons for leaving California are significant. Under his 10-year compensation package approved in 2018, Musk could earn well over $ 50 billion in stock and awards in 12 tranches — he’s already reached the fourth. He would have to pay income taxes on the profits when he exercises the options. The top state income tax rate in California is 13.3%. In Texas, it’s zero.
Musk’s awards started kicking in after the company reached $ 100 billion in market cap along with specific metrics for revenue or adjusted earnings. Each $ 50 billion increase in market cap, up to $ 650 billion in total market value, leads to another payout if met with a revenue or profitability target. The company is already worth over $ 550 billion, after starting the year well below $ 100 billion.
During the third quarter, the second and third tranches vested, and the fourth was achieved in October, the company said in its latest quarterly report. That equals roughly 33.8 million of the 101.3 million shares. For the package to stay intact, Musk must remain either CEO or executive chairman and chief product officer.
Musk and spokespeople for Tesla and SpaceX did not immediately respond to requests for comment.