Musk needs to reach four more milestones for a $1.4bn windfall
The Tesla founder got 5.27-million stock options in 2012, tied to value targets; Musk has until 2022 to reach the final targets and cash in
New York — Only six remaining milestones stand between Tesla’s Elon Musk and an estimated $1.4bn windfall for the car maker’s billionaire CEO.
Musk, who was awarded 5.27-million stock options in 2012 tied to Tesla operational and market-value targets, has achieved six of the 10 operational goals to date, up from five at this time last year, according to a proxy statement filed on Thursday.
The car maker has also met eight of the 10 market-value milestones, up from seven last year, the filing shows.
Musk has until 2022 to reach the goals that trigger the pay-out, but he could cash in the options sooner if the company hits targets ahead of schedule. They are worth an estimated $1.4bn as of Thursday’s close, Bloomberg calculations show. That would be quite a pay-day for the enigmatic Tesla chief who has never accepted his nominal salary.
Musk earns one-tenth of the options every time Tesla hits a pair of goals — one tied to its market value and another to the company’s operations.
Tesla delivered 25,000 vehicles in the first quarter, which vaulted its aggregate number of produced vehicles above 200,000. That milestone won’t be considered achieved until the company’s board has confirmed the number, according to the filing.
The California-based company has said it’ll begin building the more affordable Model 3 in July and has predicted its annual output could soar to 500,000 vehicles by 2018.
In addition to production targets, Tesla has to maintain a gross margin of at least 30% for four consecutive quarters. In the four most recent quarters, the company has posted results ranging between about 19% and 28%.
For Musk to receive the $1.4bn, Tesla’s market value also needs to remain above the $43.2bn threshold for six months, equivalent to a stock price of about $270. The estimate is based on the number of shares outstanding as at January 31.
Tesla, which briefly surpassed General Motors earlier this month to became the most valuable US car-maker, had a market value of $49.3bn as at Thursday’s close.
The $1.4bn windfall from his options is based on what Musk would pocket if he’d been able to exercise all 5.27-million of them on Thursday, when Tesla shares closed at $302.51 in New York. The securities have a $31.17 strike price. So far, he hasn’t exercised any.
Tesla didn’t name any new independent directors in the proxy. The company said last week it was searching for two new board members who don’t have ties to Musk, as pressure to strengthen management oversight rises amid Tesla’s soaring market value.