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Tesla-SolarCity merger: the Rive Brothers are giving up over $100 million worth of stock options

Founder & COO Peter Rive, Chairman Elon Musk , SolarCity Founder & CEO Lyndon Rive speak at the company’s IPO at the NASDAQ stock exchange on December 13, 2012 in Manhattan, New York. SolarCity is a leader of distributed clean energy and will trade under SCTY. (Mark Von Holden/AP Images for SolarCity)

Another interesting tidbit of information coming out of Tesla’s SEC filing for its proposed acquisition of SolarCity yesterday – following our reports about Tesla’s board first turning down the merger and Tesla planning another round of financing – now we learn that the Rive Brothers are going to forfeit over $100 million worth of stock options through the merger.

SolarCity’s co-founder and CEO, Lyndon Rive, and his brother Peter, co-founder and CTO, both cousins of Tesla CEO Elon Musk, were granted a new stock option compensation plan in September 2015. The plan, referred to as the “founder options” or “founder awards”, was based on market and performance vesting conditions.

It includes 5,000,000 stock options (3 million for Lyndon and 2 million for Peter) that would have vested at $48.97 per share, but at yesterday’s market close, they would have been worth over $100 million.

While all the unvested options of SolarCity’s executive officers are being transferred into Tesla options through the merger, the Rive brothers founder awards will not transfer to Tesla stocks like the others. Here’s a chart of the transfers Tesla shared in the SEC filing:TSLA to SCTY stock options execs

As you can see, the Rive brothers are the only ones without transferred and unvested options. Toby Corey and Jon Wellinghoff don’t have vested options because they are fairly new to the company.

Tesla notes that as a result of the merger, they did not satisfy the market and performance vesting conditions:

“Immediately prior to the effective time of the Merger, the SolarCity stock options granted to each of Lyndon Rive (3,000,000 stock options granted) and Peter Rive (2,000,000 stock options granted) on September 15, 2015 (referred to as the “founder options”) will be cancelled for no consideration in accordance with their terms due to the applicable vesting conditions not being satisfied as a result of the Merger.”

It’s not like Elon Musk is leaving his cousins penniless on the street. They will still each hold about $38 million worth of Tesla stocks after the merger.

Additionally, if the merger does go through and the Rive brothers end up leading Tesla’s newly acquired solar division, it’s likely that Tesla’s board will craft them a new stock option plan attached to milestones related to Tesla’s expectations for the new combined company.

Featured Image: SolarCity Founder & COO Peter Rive, Chairman Elon Musk , SolarCity Founder & CEO Lyndon Rive speak at the company’s IPO at the NASDAQ stock exchange on December 13, 2012 in Manhattan, New York. (Mark Von Holden/AP Images for SolarCity)

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