Elon Musk is qualifying for his upcoming ~$700 million Tesla stock option payday despite his best effort to keep the stock lower.
While Musk doesn’t accept a salary from Tesla, shareholders granted him a very generous and ambitious stock compensation plan in 2018.
The plan is linked to a significant increase in revenue, adjusted EBITDA, and a massive increase in company valuation.
After those milestones are achieved, each $50 billion increase in Tesla’s market capitalization would result in Musk receiving 1.69 million shares at a set price.
Here are the details of the plan:
With Tesla’s stock closing at $761.19 yesterday, Tesla’s stock market value has now achieved a six-month average of $100.2 billion – making the first tranche of the compensation plan eligible to vest, according to an analysis of Refinitiv data via Reuters.
At a set price of $350.02 each per vested share, Musk would clear almost $700 million from the first tranche thanks to Tesla’s high share price.
Last Friday, Musk said that Tesla’s share price was “too high” in a series of tweets – wiping out billions of dollars worth of Tesla’s valuation.
At the time, we speculated that Musk was trying to prove his detractors wrong who have accused him of only pushing the “free America” narrative to get his stock options, which he ended up later confirming it was part of what drove him to call out Tesla’s share price.
The stock crashed almost 10% following his comment, Tesla investors didn’t care for long as the stock was back up to his pre-comment level the next day – triggering his stock option tranche anyway.
This is pretty crazy. I know the market was rallying too, but I was surprised to see so many investors put Elon’s comment behind them so quickly. I suppose some of them saw it as Elon giving them an opportunity to buy, but Elon didn’t say by how much he thought Tesla was overvalued.
Either way, he now gets access to the first tranche of this massive compensation plan on the day that his new son his born no less.
Now before anyone panics, I would expect Elon to sell Tesla shares once he starts exercising those options. I know Elon says he doesn’t sell Tesla shares, but he is going to have to pay taxes on these and with the numbers we are talking about, I’d be surprised if he can get the money somewhere else.
While this is known, I wouldn’t be surprised if some people end up panicking anyway after he said the stock was too high.
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