Elon Musk Is About To Receive An Estimated $845 Million Payday

Despite the issues of months past, including shutting down Fremont for the coronavirus, laying off hundreds of contractors and staff and putting himself on the hook for his own board’s D&O insurance, Elon Musk still seems set to cash in on a ~$845 million payday in the form of 1.69 million stock options at $350 per share.

If the company can hold its 6 month market cap average over $100 billion this week, Musk will qualify for the payout in Tesla stock, which came as a result of a March 2018 compensation package that could pay Musk a total of $56 billion in stock options over the course of 10 years, should he meet certain milestones. 

As you can see from these two charts, many of these milestones have nothing to do with GAAP net income, profit or cashflow.

Instead, they focus on revenue, adjusted EBITDA and market cap – all targets that can be met without the company necessarily having to show any type of tangible and consistent cash generation or GAAP profit.

The compensation package could wind up totaling nearly $56 billion if Musk meets all of his targets. Given the current share structure, it means that Tesla stock would be approaching nearly $4,000 per share. It also means that Musk will have been awarded compensation equating to about 8% of the company’s total market cap, assuming he hits the $650 billion market cap target.

What has been driving Tesla’s stock to where it is today remains to be seen. Those reporting on Musk’s compensation package, like The Observer, can only call it “two rounds of wild stock rally”. 

The $100 billion market cap goal, which needs to be held for 90 days, looks like it has been met. That will award Musk options to buy 1.69 million shares at $350 which, at today’s priced, could be exercised and valued at around $845 million almost instantly. 

When Tesla plunged with the rest of the world as a result of the coronavirus, it looked as though Musk may have had lost his chance at his bonus. But, Tesla stock magically sprung back to life and its 6 month average market cap stood at $96 billion as of the beginning of this week. 

Given the stock’s rise after yesterday’s earnings report, despite Musk’s insane behavior on the company’s conference call, it looks as though the $100 billion threshold has been met and Musk will get his payday. 

Maybe he’ll hire back some of the hundreds of people he’s fired with that money. Or payback some of the money he’s taken from the U.S. taxpayer. Of course, we’re just joking. He’ll spend it on private jet fuel.