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Elon Musk ahead of pace for US$1.6b Tesla Motors payday
[NEW YORK] Elon Musk is ahead of schedule to get a huge payday from Tesla Motors Inc even though he earns less than US$40,000 in annual salary.
In 2012, the electric carmaker awarded its billionaire founder 5.27 million options tied to milestones including developing new vehicles and ramping up production.
While he was given until 2022 to meet the goals, he has already achieved 50 per cent of them, according to a proxy statement issued April 15. That means he may get US$1.6 billion well before then.
Under the 2012 stock plan, Mr Musk earns 1/10th of the options every time Tesla hits a pair of goals - one tied to its market value and another to the company's operations. While he's achieved seven targets tied to the growth of Tesla's market capitalization, he's only hit five of 10 operational ones.
That's been good enough for him to receive half of the options so far. With a strike price of US$31.17, those 2.64 million options would be worth US$589 million if he had exercised them at Friday's close. The total option award is intended to compensate Mr Musk, who has never accepted his salary, for 10 years.
For Mr Musk to receive the US$1.6 billion, he needs to boost Tesla's value another 28 per cent, to US$43.2 billion. He also has to maintain a 30 per cent gross profit margin for four quarters, bring the car-maker's aggregate production to 300,000 vehicles and bring the Model 3 to market.
"Many of the requisite milestones were viewed as very difficult to achieve" when they were granted in 2012, Tesla said in the filing last week.
Khobi Brooklyn, a Tesla spokeswoman, said the company considers the April 15 filing its official comment.
Mr Musk has faced some hurdles recently. Last week, Tesla recalled 2,700 Model X sport utility vehicles to repair third row seats, after the SUV was late coming to market.
Sales missed expectations because of parts shortages, the company said in an April 4 press release. In November, Tesla recalled 90,000 Model S sedans to check seat belts.
None of that has hurt the stock price. Tesla was up 22 per cent in the 12 months through April 15.