As you may already know, Tesla CEO Elon Musk doesn’t take a salary, at least not in the traditional sense. Even though Tesla is the world’s most valuable automaker, and arguably a huge part of that success is thanks to Musk, he doesn’t get a normal paycheck. Instead, the vocal CEO gets stock options, but only if he (more importantly his employees and executives) works for them.
In short, Tesla provided Musk with a long list of milestones the company should work to achieve now and into the future. When Tesla achieves a certain number of milestones, Musk gets another compensation package.
According to Reuters, Musk’s most recent payout of $23 billion became available not long after he announced that he was offering to buy Twitter. However, the compensation agreement must be approved by Tesla’s board before it becomes official.
If you don’t follow financial markets or understand how Musk’s pay package works, you’re certainly not alone. It’s actually somewhat complicated if you dive into it deeply. However, to simplify the situation, Autoblog shared via Reuters:
“Tesla reported quarterly revenue of $18.76 billion and so-called adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $5.02 billion. Combined with the previous three quarters’ results, that surpasses milestones that trigger the vesting of the ninth through 11th of 12 tranches of options granted to Musk in his 2018 pay package.”
Basically, as Tesla’s market cap and the financial situation improve, new targets are hit, which requires the company to compensate Musk.
Every time a milestone is surpassed, Musk becomes eligible for the vesting of additional tranches from the earlier agreement. In this case, three tranches will be vested. This means he gets the option to purchase 8.4 million Tesla shares at just $70.01 each.
Tesla’s stock closed at $977.20 on Wednesday, April 20, 2022, ahead of earnings. At that price, Musk could make a $23 billion profit. Meanwhile, Tesla stock is up almost $100 this morning in pre-market trading.
Source: Reuters via Autoblog
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