- Tesla’s shares have doubled in price, paving the way for a massive payday for CEO Elon Musk.
In the last three months, Tesla’s shares have doubled in price, paving the way for a massive payday for CEO Elon Musk.
Tesla’s board and shareholders approved an extraordinary compensation plan for Musk in 2018, allowing him to receive potentially more than $55 billion worth of options over the next decade. Musk actually does not earn a salary, although he owns around 20 percent of the company.
When Tesla’s market capitalization hits and remains at $100 billion, Musk will gain the first tranche. Based on FactSet, given the current amount of outstanding shares, this means Tesla’s stock would have to hit $554.81. The options would be worth around $346 million, at that amount.
Tesla stock closed Tuesday to $537.92 for 2.5 percent.
Yet musk doesn’t get charged unexpectedly when Tesla’s stock reaches $554.81.
Tesla’s market cap will remain high enough to be worth $100 billion on both a 30-day and six-month trailing scale, according to a regulatory filing. In order for Musk to get that first tranche, the company must also reach annual revenue or EBITDA targets at the same time. The corporation would have to disclose either $20 billion in trailing four-quarter sales, or $1.5 billion in EBITDA (minus stock-based compensation).
The compensation plan faces a challenge from the courts.
Tesla stockholder Richard Tornetta sued Musk and members of Tesla’s board of directors in a Delaware Chancery Court, arguing the bonus to be unfair, and the board’s decision to grant it to him amounts to a breach of fiduciary obligations.
Tesla, a seventeen-year-old car maker, is now worth twice as much as Ford, a centuries-old car giant, after a spike in its stock price. Over the past few months, Tesla’s stock has been on a roll, rising from $255 in October to $443 over the close of the market on Friday. This has ensured that Tesla’s market cap has grown remarkably 73 percent over the past four months— with Tesla’s market cap now at $80 billion, it’s now more than twice the Ford’s $37 billion market cap.
Tesla’s stock has risen because for once Tesla has succeeded in addressing one of its most frequent bugbears— selling as many vehicles as it had expected. In 2018, Ford’s CEO had trolled Elon Musk to rejoice as Tesla delivered 7,000 cars a week, haughtily saying that in 4 hours Ford made that many vehicles. Yet things have changed since then— during the fourth quarter of last year, Tesla shipped 112,000 vehicles over the analyst estimates of 106,000 vehicles. There are 92,500 Model 3 vehicles and 19,450 Model S / X vehicles in Tesla numbers. Tesla delivered 50% more cars in 2019 than in the previous year.
