- Tesla’s stock rally has put CEO Elon Musk closer than ever to the first payout of his compensation package, awarded in January 2018.
- If Tesla sustains a $100 billion market capitalization, Musk would unlock 1.69 million options worth roughly $346 million.
- Here’s what needs to happen before Musk unlocks the options.
- Watch Tesla trade live on Markets Insider.
- Visit Business Insider’s homepage for more stories.
Tesla is off to a great start in 2020. So far, the stock’s 31% surge has pushed its market capitalization to new highs, making it the highest-valued US automaker of all time, and worth more than Ford and GM combined.
In early trading Wednesday, Tesla’s stock rally pushed its market capitalization to another milestone: It surpassed $100 billion for the first time ever.
That means that Tesla’s CEO Elon Musk is closer than ever to completing a section of his mega-compensation package, which would unlock 1.69 million stock options worth roughly $346 million. Tesla has already completed an operational target necessary for Musk’s options to vest.
Here’s what else Tesla needs to achieve for Musk to complete the first market capitalization tranche:
- The first tranche milestone is a market capitalization of $100 billion. Tesla hit this goal Wednesday, meaning the clock starts now.
- Sustained market capitalization is required for each Market Capitalization Milestone to be met, other than in a change-in-control situation. Specifically, there are two prongs that must be met to achieve a given Market Capitalization Milestone:
- Six calendar-month trailing average (based on trading days).
- Thirty-day calendar-day trailing average (based on trading days).
The award, which was granted to Musk on January 21, 2018, was $2.6 billion in total. It has a number of vesting tranches related to market capitalization and operational milestones that Tesla must reach for Musk to unlock up to 20.2 million stock options. Musk is not guaranteed a salary or any cash bonuses along the way.
When the package was awarded, Musk had the potential to gain as much as $55.8 billion if no new shares were issued. Since then, the company has awarded stock to employees and sold $2.7 billion in shares and convertible bonds.
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