After a brief setback related to Twitter that we can now say was a simple delay of the inevitable, Tesla CEO Elon Musk has finally released the first tranche of its huge and unorthodox Tesla compensation system in the form of 1.688 million Tesla shares available at a deeply reduced price, making it one of the highest paid executives of all time .
This price is around $ 350 per share, while the current value of Tesla shares is closer to $ 800 per share, so the difference comes to Musk’s value of around $ 770 million. It is not yet known if Musk exercised these stock options, but recent company financial documents have officially declared that he was indeed qualified for them:
“As of the date of this proxy circular, one of the 12 tranches of this allotment vest and becomes exercisable, subject to payment by Mr. Musk of the exercise price of $ 350.02 per share and the minimum holding period of five years generally applicable to any shares he acquires during the exercise. “
This “five-year holding period” means that Musk must wait at least five years before selling the stock, but theoretically if he were to sell everything now, he would make a profit of about $ 770 million.
In case you did not follow, Musk is not paid for his work as CEO of Tesla, but rather a series of stock market awards linked to various financial benchmarks that measure the performance of the company under his leadership. The main benchmarks are a market capitalization of at least $ 100 billion on the 30-day and six-month follow-up averages, but also on the company’s income targets.
Now Musk is moving into the second phase of this 12-tranche compensation plan, which he is already about to unlock. If and when the 12 tranches are unlocked, the total package could be worth up to $ 55 billion or more, all depending on the increase in the value of Tesla shares. But on the other hand, if the company were to run aground and the stock had to be absorbed, Musk’s stake in it (around 18.5% of the company before the launch of this bonus) would also be realized .
Musk and Tesla are currently involved in a fight with California officials over the opening of their Tesla plant in Fremont, California, in defiance of state attempts to keep nonessential businesses closed to slow the spread of COVID-19. He and Tesla’s board of directors are also facing legal action from a Tesla shareholder who says the payment plan is “excessive” and a violation of the company’s fiduciary duty.