Daily Breeze

Tesla’s Elon Musk may get a more than $700 million payday if company’s value keeps rising

With the company’s share price rallying over the last month, the chief executive is getting closer to a massive potential payout.

With Tesla’s share price rallying over the last month, Chief Executive Elon Musk is getting closer to a potential payout that could put more than $700 million into his pocket.

That’s because Tesla’s market valuation of nearly $144 billion has brought the company’s six-month average valuation to around $95 billion. Should Tesla’s stock price continue to rise, and give the company a six-month average valuation of $100 billion, Musk would be in line for a stock-option grant that, if exercised, would be worth more than $700 million to the maverick chief executive.

It’s all because of Musk’s performance-based compensation package. Musk, who owns about 20% of Tesla’s outstanding shares, makes no salary or bonus as part of a compensation plan that Tesla shareholders approved in 2018. Under the plan’s terms, Musk is eligible to buy a series of packages of stock options, also known as tranches, at a set price if Tesla’s market capitalization reaches specific milestones every six months.

Should Tesla’s market cap hit a six-month average of $100 billion, it would trigger a tranche of 1.69 million options that Musk could purchase for $350.02 each. If, for example, he were to turn around and sell those shares at the stock’s Monday closing price of $798.75 each, Musk would profit around $758 million.

Last month, it seemed like Musk stood little chance of seeing his possible compensation become a reality. On March 18, Tesla shares fell to a year-low point of $350.51 just days before the company ceased production at its plant in Fremont due to the region’s shelter-in-place order that was enacted to help slow the spread of coronavirus.

Since then, Tesla’s share price has more than doubled, to almost $770 a share on Tuesday, In early April, Tesla reported better-than-expected vehicle deliveries for the first  quarter of the year, and also said it would furlough some employees and cut salaries across the company in order to deal with financial issues because of the coronavirus pandemic. Tesla is also reportedly planning on re-opening its Fremont plant and bringing some employees back to work this week.

Tesla is also scheduled to give its full first-quarter results after U.S. stock markets close on Wednesday. The company is also expected to give an assessment of how it believes the coronavirus crisis will impact its business in the coming months.