Thursday, January 23, 2020
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Musk’s crazy pay structure is closing in on its first milestone
Elon Musk is already quite wealthy.
According to data from Bloomberg, Musk’s net worth is currently estimated at around $32 billion, up from under $25 billion just after Thanksgiving.
And so the rally in Tesla (TSLA) shares has already been worth around $7 billion to Musk.
Elon is doing fine.
But the Tesla CEO is currently on the doorstep of unlocking the first milestone in his incentive-heavy pay package approved by the company’s board back in 2018.
And this first payday could be worth upwards of $370 million.
The basic outline of Musk’s pay structure is that it’s all stock now.
Elon doesn’t make a salary running Tesla, but he does stand to make tens of billions of dollars in stock options if the company’s market cap, revenue, and profitability increase over the next decade.
These options vest in 12 tranches, each with exposure to 1.69 million shares of Tesla. At Wednesday’s closing price, the first tranche of options eligible to be awarded to Musk would be tied to shares worth around $962 million. Musk’s strike on these stock awards is $350.02, meaning he’d stand to make just over $371 million if he sold all the options immediately.
The market cap milestones start at $100 billion. A new tranche of stock is eligible to be unlocked for each $50 billion in additional market cap up to $650 billion. At the time the pay package was awarded, Tesla’s market cap stood at closer to $60 billion; as of Wednesday’s close, the company’s market cap was $102.7 billion.
This puts Musk in the “go zone” for getting his first tranche of stock. So long as the market value stays above $100 billion over a trailing six-month and 30-day timeframe.
Market cap milestones, however, must be paired with one of the performance targets outlined by the company. These targets can only be met by totals for the previous four consecutive quarters.
Next Wednesday, Tesla will report results for the fourth quarter. The good news for Elon? Wall Street expects the company will record more than $20 billion in revenue and $1.5 billion in adjusted EBITDA for 2019.
And so: operational milestone unlocked.
All Musk will need over the coming months, then, is for the company’s market cap to average $100 billion or more. But since Tesla shares go up everyday, this should be the easy part.
Now, since Musk re-arranged his pay package roughly two years ago, a lot has happened in Tesla-land.
The company was apparently going private at $420 per share.
Then Musk got in trouble with the SEC.
Then the stock fell to a three-year low in mid-2019.
But that’s all in the past: now, everything is awesome.
And now Musk has President Donald Trump saying we need to “protect” Musk and other geniuses, like Thomas Edison and whoever invented the wheel.
“I spoke to [Elon Musk] very recently, and he’s also doing the rockets,” Trump told CNBC on Wednesday.
“He likes rockets. And he does good at rockets, too, by the way. I never saw where the engines come down with no wings, no anything, and they’re landing. I said I’ve never seen that before.”
Soon, it seems, there will be more money for more rockets.
What to watch today
8:30 a.m. ET: Initial Jobless Claims, week ended Jan. 18 (214,000 expected, 204,000 prior); Continuing Claims, week ended Jan. 11 (1.750 million expected, 1.767 million prior)
9:45 a.m. ET: Bloomberg Consumer Comfort, week ended Jan. 19 (66.0 prior)
10 a.m. ET: Leading Index, December (-0.2% expected, 0.0% prior)
6:30 a.m. ET:Southwest Airlines (LUV) is expected to report adjusted earnings of $1.09 per share on $5.72 billion in revenue
6:55 a.m. ET:Procter & Gamble (PG) is expected to report adjusted earnings of $1.37 per share on $18.37 billion in revenue
7 a.m. ET:Comcast (CMCSA) is expected to report adjusted earnings of 77 cents per share on $28.15 billion in revenue
7:30 a.m. ET:American Airlines (AAL) is expected to report adjusted earnings of $1.14 per share on $11.31 billion in revenue
7:30 a.m. ET:Kimberly-Clark (KMB) is expected to report adjusted earnings of $1.70 per share on $4.54 billion in revenue
4 p.m. ET:Intel (INTC) is expected to report adjusted earnings of $1.25 per share on $19.22 billion in revenue
Other reports: Las Vegas Sands (LVS)
France pauses Big Tech digital tax to avoid US-Europe trade war [Yahoo Finance UK]
YAHOO FINANCE HIGHLIGHTS