Elon Musk has secured the second tranche of his stock compensation plan as Tesla’s CEO worth more than $ 2 billion in TSLA stock, which he eventually plans to use for his plan to colonize Mars.
While Musk does not accept a Tesla salary, he was awarded a very generous and ambitious stock compensation plan in 2018 by shareholders.
The plan is linked to a significant increase in revenue, adjusted EBITDA, and a massive increase in Tesla’s market valuation.
Once those milestones are achieved, each $ 50 billion increase in Tesla’s average market capitalization would result in Musk receiving 1.69 million shares at a fixed price of $ 350 per share.
The CEO would pocket the difference between $ 350 and whatever price Tesla shares trade when he exercises the stock options.
Here are the main details of the compensation plan:
In May, Tesla confirmed that all milestones for the first installment of Musk’s compensation plan were achieved and awarded the 1.69 million block, although the CEO has not yet exercised them.
You have 5 years to do it.
But with the rapid rise in Tesla’s stock price, the next milestones were already achieved just a few months after the first tranche.
As of today, Tesla’s average market valuation is high enough for the second tranche of Musk’s compensation plan to yield.
At the current share price, the new tranche is worth about $ 2.1 billion, and since you haven’t exercised your first tranche, you already have access to $ 4.2 billion in stock options from your current compensation plan. .
The Tesla board has yet to approve the award to make it official.
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This is an incredible amount of money, and once Elon decides to exercise those options, things will go wild.
First, a lot of tax will have to be paid, but more interestingly, it could be what finances Elon’s plan for SpaceX to colonize Mars and make humans a multi-planet species.
When Elon’s generous compensation plan was approved in 2018, the CEO said he plans to sell the ‘primary’ stake in Tesla in ‘approximately 20 years’ to fund SpaceX’s plans on Mars.
He commented something similar again earlier this month:
Essentially. The long-term purpose of my Tesla actions is to help make life multi-plane to ensure its continuity. The massive capital needs are 10 to 20 years. By then, if we are lucky, Tesla’s goal of accelerating sustainable energy and autonomy will primarily be achieved.
– Elon Musk (@elonmusk) July 7, 2020
Musk already owns a large 20% stake in Tesla, but those new stock options will help him finance those plans while holding a stake in the company.
The CEO could also use Tesla dividends to finance other projects if the automaker ever decides to go down that path.
Tesla currently does not pay dividends and does not plan to do so for the foreseeable future as it reinvests everything in growth, but it could be a different story in 10-20 years from now.
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