Tesla chief executive Elon Musk is about to win the first tranche of $ 346 million in a record payment package, after the shares of the electric vehicle manufacturer doubled in the last three months.
Tesla shares rose 9 percent to a record on Monday. They need to increase another 6 percent to put the stock market value of Tesla at $ 100 billion and then stay at that level for both an average of one month and six months to activate the acquisition of the first of the 12 tranches of options granted to Musk to buy shares of Tesla.
Musk has already reached an operational objective that is also necessary for the options to be granted.
In order for Musk’s subsequent tranches to be awarded under the terms of the 2018 package, the company’s market capitalization would have to continue to increase sustainably in increments of $ 50 billion over the 10-year period of the agreement, with the billionaire earning the complete package if the market capitalization of Tesla reaches $ 650 billion and the electric car manufacturer achieves several revenue and profit targets.
A total reward for Musk, who is also the majority owner and CEO of the rocket manufacturer SpaceX, would surpass anything previously granted to US executives. UU., According to Institutional Shareholder Services, a proxy advisor that recommended investors reject the payment package at that time.
Musk does not receive salary or cash bonus, only options that are based on market capitalization and Tesla’s growth milestones.
“This is the very definition of pay for performance,” said Ian Keas, senior director of Longnecker & Associates, an executive compensation consulting firm. “But is he the only individual who could serve in that position as CEO and deliver that value to shareholders? That is the trillion dollar question. “
Musk’s potential payment is compared to the $ 638 million received by Snap’s founder, Evan Spiegel, in 2017 after the initial public offering of the social media company.
In 2018, Walt Disney CEO Robert Iger won stock grants worth up to $ 149.6 million, including prizes related to the purchase of Disney film and television assets from Twenty-First Century Fox.
Musk has transformed Tesla from a niche car manufacturer with production problems into the world leader in electric vehicles, with American and Chinese factories. So far it has remained ahead of its more established rivals, including BMW and Volkswagen.
Last week, Tesla’s stock value reached nearly $ 89 billion, for the first time eclipsing the sum of General Motors and Ford, driven by a surprising third-quarter profit, progress in a new factory in China and better car deliveries than expected in the fourth quarter
However, many investors remain skeptical that Tesla can consistently offer profits, cash flow and growth. More Wall Street analysts rate Tesla as “selling” than “buying,” and the company’s shares have been one of the smallest on Wall Street.
Tesla was valued at approximately $ 53 billion when shareholders approved the payment package in January 2018 and faced a cash crisis, production delays and increased competition from rivals.
He was seen as enormously ambitious because it implied that the company’s value could grow up to ten times in 10 years.
Last year, Musk reached two operational milestones, achieving revenues in excess of $ 20 billion and adjusted earnings before interest, taxes, depreciation and amortization of $ 1.5 billion in four consecutive quarters.
Tesla’s “adjusted” EBITDA excludes share-based compensation, which in the first nine months of 2019 reached $ 617 million.
Currently, Musk owns about 34 million shares of Tesla, which is equivalent to 19 percent of the company. Your compensation package would allow you to buy another 20.3 million shares if all your options are consolidated.
When Tesla first introduced the Musk package in 2018, he said that, in theory, Musk could reap up to $ 55.8 billion if no new shares were issued. Since then, Tesla has awarded shares to employees and last year sold $ 2.7 billion in convertible stocks and bonds. – Reuters