On Thursday, Tesla Inc (NASDAQ: TSLA) released a document filed with the Securities and Exchange Commission (SEC) that confirmed its CEO Elon Musk earned the first tranche of his massive payout tied to stock options. As the company achieved certain growth and development goals, Elon Musk received the right to buy 1.69 million Tesla shares. The shares are worth over $700 million based on Thursday’s closing price.
Stock Awards for Elon Musk
Back in 2018, Elon Musk received Tesla’s performance-based compensation package of 20.3 million stock option awards divided into 12 tranches. In other words, he received options that vest based on Tesla’s market cap and milestones for revenue and profit growth instead of salary or other cash bonuses. Each of Musk’s tranches gives him the option to buy 1.69 million Tesla shares at $350.02 each.
Before now, Tesla has already hit three targets that allow Musk to exercise the options. They included $100 billion in average market cap in a 30-day period, $20 billion revenue, and $1.5 billion in earnings before adjustments.
Tesla wrote in SEC filing:
“As of the date of this proxy statement, one of the 12 tranches under this award has vested and become exercisable, subject to Mr. Musk’s payment of the exercise price of $350.02 per share and the minimum five-year holding period generally applicable to any shares he acquires upon exercise.”
It is not yet clear whether Musk exercised his options. Based on Thursday’s closing price of $805.81, they would be worth about $775 million.
As of May 1, Elon Musk owned about 18.5% of Tesla stock worth around $24 billion. By Thursday, this figure had risen to 20.8%, a total of 38.7 million shares, including 18.5 million used as collateral for Musk’s personal debt. According to Tesla’s filing, Elon Musk is required to hold the shares for at least five years.
Tesla (TSLA) Stock Performance
Over the last 12 months, Tesla (TSLA) stock price has more than quadrupled. Besides, since 2018, when Musk’s package was revealed, it has more than doubled.
Because of the coronavirus pandemic, Tesla had to temporarily close its factories. However, the shutdown did not have a critical impact on Tesla stock. This year, Tesla shares are 92.63% up. In March, when the whole market crashed, Tesla stock hit the trough of $361.22 but quickly rebounded.
Last week, Tesla factory at Fremont, California, returned to practically normal activity. But it is expecting to face serious issues related to lower demand as high-income people opt to work from home. To somehow extenuate the problem, Tesla reduced the price for its Model 3, Model S, Model X in North America. Besides, it cut the price for its Model S and Model X in China to gain some competitive advantage.
Following the news, Tesla (TSLA) stock closed 1.76% down yesterday, at $805.81. In the pre-market today, it is 0.16% up, $807.06 per share.
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