Musk gets Tesla’s $700 million option award

Tesla’s chief executive, Elon Musk, has been given his first stock option, according to a filing with the Securities and Exchange Commission on Thursday. That includes about 1.7 million Tesla shares, which are worth about $775 million at today’s close.

Musk gets Tesla's $700 million option award

Tesla CEO Musk’s total compensation for 2019 is $23,760, and Chief Financial Officer Zachary Kirkhorn’s total 2020 compensation is $21.2 million, including $15.9 million in option stakes, according to the data. The announcement also said Tesla would hold its annual general meeting on July 7.

The “six-month average market cap of $100 billion” would give Musk the first of 12 options, as part of an agreed compensation package for 2018.

Tesla must also reach $20 billion in revenue or $1.5 billion in EBITDA (minus stock compensation) at the end of the fourth quarter before Musk can get the payment, according to a 2018 regulatory filing that outlines the terms of the payment.

As of May 1, Musk was not paid, but owns about 18.5 percent of the company, worth about $24 billion, according to FactSet.

Musk is also a major shareholder and chief executive of SpaceX, the rocket maker, but he does not receive any salary or cash incentives, and his only reward is to get more options based on Tesla’s growing market value, revenue and profits.

Analysts predict that if Musk gets the full dividend, the reward will be the highest award in U.S. history for U.S. executives.

When Tesla unveiled Musk’s plan in 2018, it said it would theoretically get a return of up to $55.8 billion if it didn’t issue new shares. Since then, however, Tesla has been issuing shares to compensate its employees, selling $2.7 billion in stock and convertible bonds last year.

Musk’s subsequent option-to-share conversion will be awarded in an increase of $50 billion over the 10-year deal. If Tesla’s market capitalisation reaches $650 billion and the tech-focused carmaker achieves multiple revenue and profit targets, Musk could earn more than $50 billion.

Tesla’s first-quarter 2020 results showed third consecutive quarterly earnings after it shut down its Fremont, California, plant because of a state-related coronavirus blockade.

Tesla reopened its Fremont plant on May 9, defying local health regulations.