An estimated $1.4 billion windfall and Elon Musk, the carmaker Tesla’s billionaire chief executive officer, is now separated by only six remaining milestones that still stand between them.
According to a proxy statement filed on Thursday, Musk has achieved six of the 10 operational goals to date, up from five at this time last year. Musk was awarded 5.27 million stock options in 2012 tied to Tesla operational and market value targets. The filing shows that up from seven last year, the automaker has also met eight of the 10 market value milestones.
Musk could cash in the options sooner if the company hits targets ahead of schedule even though he has until 2022 to reach the goals that trigger the payout. Bloomberg calculations show that they are worth an estimated $1.4 billion as of Thursday’s close. The enigmatic Tesla chief who has never accepted his nominal salary and that would be quite a payday for him.
Every time Tesla hits a pair of goals — one tied to its market value and another to the company’s operations, Musk earns one-tenth of the options every time.
The aggregate number of vehicles produced by Tesla was valued above 200,000 as the company delivered 25,000 vehicles in the first quarter. And according to the filing, until the company’s board has confirmed the number, that milestone won’t be considered to have been achieved. Tesla has predicted its annual output could soar to 500,000 vehicles by 2018 and the Palo Alto, California-based company has said it’ll begin building the more affordable Model 3 in July.
A gross margin of at least 30 percent for four straight quarters have to be maintained by tesla in addition to production targets too achieve the target. the company has posted results ranging between about 19 percent and 28 percent in the four most recent quarters.
In what should be equivalent to a stock price of about $270, Tesla’s market value also needs to remain above the $43.2 billion threshold for six months for Musk to receive the $1.4 billion. The number of shares outstanding as of Jan. 31 is the basis of that estimate. Tesla had a market value of $49.3 billion as of Thursday’s close and the carmaker had briefly surpassed General Motors Co. earlier this month to became the most valuable U.S. carmaker.
What Musk would pocket if he’d been able to exercise all 5.27 million of them on Thursday, when Tesla shares closed at $302.51 in New York, forms that basis of the $1.4 billion windfall from his options. The securities have a $31.17 strike price. So far, he hasn’t exercised any.
In the proxy, Tesla didn’t name any new independent directors. But as pressure to strengthen management oversight rises amid Tesla’s soaring market value, the company said last week it was searching for two new board members who don’t have ties to Musk.
(Adapted from Bloomberg)