Tesla (NASDAQ:TSLA)Awards Musk $2.6-B for Failing to Make Cars
Tesla Inc. (NASDAQ:TSLA) granted it hypemeister founder a $2.6-B award, the largest-ever of its kind, underscoring the company’s outsize ambitions and how intimately connected its future success is to Elon Musk.
If fully vested over the next 10 yrs, stock options would net him as much as $55.8-B. Along the way, nothing is guaranteed; Zero salary or cash bonuses.
The audacious award outlines a plan for Tesla to become 1 of the world’s biggest companies, which would make Mr. Musk perhaps the richest man on the planet in the process, but without as detailed a road map to get there as was provided with his last award
Particulars, what no particulars?.
“It’s breathtaking both in size and in terms of performance required to earn it,” Steven Hall, managing director of compensation consulting firm Steven Hall & Partners, said of Mr. Musk’s grant. “Like everything Musk is involved in, whether it’s building a company from scratch or launching satellites into space, this is beyond expectation.”
The award was on 21 January look like Tesla’s way to put to rest questions of Mr. Musk’s future at the company, since the award is contingent on him remaining CEO, or Executive Chairman and CPO.
The plan laid out in a statement Tuesday leaves open the possibility for the company to bring in another CEO who would report to Mr. Musk
Morgan Stanley (NYSEMS) analyst Adam Jonas wrote in a December report that investors widely expect Mr. Musk to devote more time to his rocket company Space Exploration Technologies Corp. and said this could lead to a merger with Tesla.
Famed investor Jim Chanos, who’s been vocal about Shorting Tesla since at least Y 2016, also said in an interview last month that he expects Mr. Musk will leave the company for SpaceX.
Mr. Musk has also embarked on several other ventures including AI (artificial intelligence) researcher OpenAI, brain-machine interface developer Neuralink and tunnel digger Boring Co.
Mr. Musk’s Y 2012 grant was linked to development and production of electric cars, his new package of 20.3-M options is tied solely to financials, i.e. raising Tesla’s market value to $650-B, roughly in line with Amazon.com Inc.(NASDAQ:AMZN), and boosting either revenue or adjusted earnings before interest, taxes, depreciation and amortization.
The grant vests in 12 increments if both market value hurdles and either 1 of the financial goals are met. The grant will require shareholder approval at a meeting in March.
Tesla has struggled with manufacturing issues that have raised questions about its ability to mass-produce cars, the company has met the production target of 300,000 vehicles outlined in Musk’s Y 2012 grant.
The remaining milestone is a gross margin of 30% for 4 consecutive Quarters.
Tesla’s margin has averaged about 21% during the last 4 Quarters, according to the data available.
The opportunity to acquire more shares will also enable Musk to continue to use his Tesla holdings to back personal loans, which he’s done for several years.
Mr. Musk had 11.5-M shares pledged as collateral as of a 20 April 2017 SEC filing.
Tesla valued the award at $2.6-B, even after applying a discount to the value because Mr. Musk cannot sell any shares for at least 5 years after he exercises his options.
This $2.6-B award dwarfs other mega-grants offered in recent years, including the $376-M in stock Apple Inc. (NASDAQ:AAPL) granted to CEO Tim Cook in Y 2011, and the more than $100-M packages Oracle Corp. (NASDAQ:ORCL) awarded to three executives in September 2017.
If the award fully vests, Musk would own a 28% stake in the company worth about $184-B, vaulting him to the Top of the Billionaires Index.
Amazon’s Jeff Bezos currently sits atop the index with a $111.5-B net worth as of Monday’s close in New York.
Mr. Musk’s stake in SpaceX constitutes about 50% of his current net worth of $21.5-B.
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