Tesla CEO Elon Musk earns first portion of performance-based stock option payout, worth about $775 million
Tesla CEO Elon Musk has earned the first portion of an incentive-based stock option payout that is worth more than $700 million, according to a regulatory filing with the Securities and Exchange Commission (SEC) on Thursday.
Based on terms in the filings, Musk will receive the first of the 12 tranches for keeping the company’s market capitalization at $100 billion along with other revenue milestones. The first tranche is comprised of about 1.7 million shares of Tesla, and would be valued around $775 million based on Thursday’s closing market value.
According to the “Summary of 2019 Executive Compensation Program” section of the filing, “Elon Musk, Chief Executive Officer, historically earned a base salary that reflected the applicable minimum wage requirements under California law, and he was subject to income taxes based on such base salary. However, he has never accepted his salary.”
Consequently, 100% of Mr. Musk’s future compensation is at-risk in the form of the remaining unvested stock options under the 2018 CEO Performance Award and the 10-year performance-based stock option award granted to Elon Musk in August 2012 (the “2012 CEO Performance Award”).
The 2018 CEO Performance Award is comprised of 12 equal tranches, each vesting only upon the achievement of a market capitalization milestone matched to one of eight revenue-based operational milestones or eight Adjusted EBITDA-based operational milestones, all of which were viewed as difficult hurdles at the time of grant.
While our stockholders benefit from each incremental increase in Tesla’s performance and stock price, aligning their interests with Mr. Musk’s incentives, the tranches under the 2018 CEO Performance Award vest only upon the full achievement of specific milestones, making it even more challenging for Mr. Musk to realize value from such increases. As of the date of this proxy statement, one of the 12 tranches under this award has vested and become exercisable, subject to Mr. Musk’s payment of the exercise price of $350.02 per share and the minimum five-year holding period generally applicable to any shares he acquires upon exercise.
Musk earned the first portion of his stock options for keeping the company’s market capitalization at $100 billion on a 30-day and six-month trailing average. According to Forbes, Elon Musk currently has a net worth of $36.3 billion.