Elon Musk Is Well On The Way To A $1.6 Billion Pay Day

The news this week has been filled with reports that Elon Musk only earns minimum wage as CEO of Tesla. Of course, he works a bazillion hours a week, so even at that he was paid $37,584 last year. That’s a lot more than most Whopper floppers earned. But let’s have no tears for Elon. He is doing quite well, thank you very much. According to Bloomberg News, he is in line to earn $1.6 billion in bonuses sooner than expected.

Elon Musk at Model 3 Unveiling

In 2012, Musk signed an agreement that will award him 5.27 million options on Tesla stock. Those options entitle him to buy shares of the company at $31.17. Musk earns one tenth of the options every time Tesla hits a pair of goals — one tied to its market value and another to the company’s operations. He has already achieved seven targets tied to the growth of Tesla’s market capitalization. He has only achieved five of the operational targets, however. Still, that entitles him to half of the options, or 2.64 million shares of stock. At the end of the trading day last Friday, those shares would be worth $589 million.

Musk has already guided the company to the introduction of the Model S and Model X. The Model 3 is scheduled to go on sale in late 2017. More than 400,000 people have reserved one to date. Tesla has also begun selling its Powerwall and Powerpack energy storage batteries to residential and commercial customers.

What does Musk have to do to qualify for all the options? Before 2022, he needs to boost Tesla’s value another 28% to $43.2 billion. He also has to maintain a 30% gross profit margin for four quarters, bring the company’s total production to 300,000 vehicles and bring the Model 3 to market. This month, six analysts set 12 month price targets for Tesla stock of $325 or more. At that price, the company’s total valuation would exceed the minimum target established in the option agreement.

“Many of the requisite milestones were viewed as very difficult to achieve” when they were granted in 2012, Tesla said in a filing with the SEC last week. Tesla spokeswoman Khobi Brooklyn said the company considers the April 15 filing its official comment on the matter. There is no guarantee that Musk and Tesla will achieve all ten of the paired goals, but considering how many of them have happened already and Musk’s well known penchant for exceeding expectations, the odds of him collecting the full number of options and doing it ahead of schedule is excellent.

Source: Bloomberg News Photo credit: Tesla Motors via YouTube

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.