Tesla Inc. said In a regulatory filing Thursday that CEO Elon Musk had earned the first portion of a huge performance-based stock options package that ties his pay to Tesla's valuation.
Musk was granted 1,688,670 Tesla (TSLA) - Get Report stock options with an exercise prices of $350.02, according to the filing, and Musk can exercise the options as of today. Under those terms, the stock would net about $780 million based on Thursday's closing price of $805.81. The award was contingent upon Tesla reaching and maintaining a market capitalization of $100 billion.
Successive payouts could potentially total billions in cash value if certain performance goals are met over a 10-year period.
The performance plan was approved by Tesla's board in 2018. Under the details of the plan, Musk could receive 12 total stock tranches, each equaling 1% of outstanding shares, if he remains at Tesla and meets valuation and operational milestones.
For the remaining milestones, Tesla's market cap must continue growing in $50 billion increments, and ultimately reach $650 billion, for Musk to receive the full potential payout. Beyond growing its valuation, Tesla must also meet escalating revenue and adjusted EBITDA targets.
In a 2018 press release, the company likened Musk's performance plan to an earlier compensation package, instituted in 2012, that was "instrumental in helping complete the roadmap laid out in its original Master Plan."
Tesla shares are up 87% year to date, and ended Thursday at a valuation of about $150 billion.
Earlier this week, Tesla announced that it will cut prices for several of its models, including the Model 3; weeks ago, it also announced a reduction in prices in China.
Wall Street analysts view the price cuts as an effort to stimulate demand amid depressed consumer spending on discretionary items such as new cars.
Tesla originally guided for 500,000 vehicle deliveries this year, and has yet to formally revise that guidance, although analysts doubt that figure is realistic given the demand shocks presented by the coronavirus pandemic.
Tesla's main Fremont, Calif. factory was also closed for several weeks this spring as part of a Bay Area stay-at-home order that temporarily closed nonessential businesses.
After an extended dispute with county officials, Tesla's Fremont factory resumed normal operations several days ago.
On Tesla's March quarter earnings call, Musk complained that the shutdown orders were a risk to Tesla's financial outlook, dubbing them "fascist."