• 1 day Are Energy Stocks A Good Bet?
  • 2 days Investors Apprehension Makes $3,000 Gold Seem Feasible
  • 3 days Beijing Just Turned Up The Heat In The Tech War
  • 4 days How Big A Threat Is Climate Change To The Global Economy?
  • 5 days $120,000 Banana Gets Eaten At Art Basel
  • 6 days The Fastest Growing Energy Sectors Of 2019
  • 7 days How To Spy On Yourself: The Doorbell To End Civil Liberties
  • 8 days Analyst Predicts Tesla Stock Will Soar To $500
  • 9 days Australian Billionaire To Invest In $88 Million Struggling Solar Project
  • 10 days Twitter-Shaming: The Biggest Threat To Any Business
  • 10 days Canada Looks To Become A Major Source For Critical Minerals
  • 10 days Hedge Funds Are Piling Into This Key Commodity
  • 12 days Trade Deal Not Likely Before Christmas 2020
  • 12 days America's $16 Trillion Debt Bubble Is About To Burst
  • 13 days Black Friday Breaks Online Shopping Records
  • 13 days Tesla's Biggest Competitor Is Hiding In Plain Sight
  • 14 days Are Celebrities Good Or Bad For Cannabis Stocks?
  • 15 days Venezuela’s Crisis Continues As Maduro Spends $5 Billion On Oil Deals
  • 16 days Elon Musk Claims 250,000 Orders For Cybertruck
  • 17 days How To Survive Thanksgiving Politics With Cannabis Gravy
Beijing Just Turned Up The Heat In The Tech War

Beijing Just Turned Up The Heat In The Tech War

China’s Communist Party has ordered…

How To Spy On Yourself: The Doorbell To End Civil Liberties

How To Spy On Yourself: The Doorbell To End Civil Liberties

The billion-dollar ‘smart’ doorbell company…

$120,000 Banana Gets Eaten At Art Basel

$120,000 Banana Gets Eaten At Art Basel

The banana escapade attracted a…

Tom Kool

Tom Kool

Writer, Safehaven.com

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is now working as news editor for Oilprice.com and Safehaven.com

Contact Author

  1. Home
  2. News
  3. Breaking News

Elon Musk’s $2.6 Billion Tesla Challenge

Musk

The recent tumble in Tesla share prices may have suggested that investor patience was wearing thin, but shareholder approval of a $2.6-billion compensation plan for Elon Musk tells a slightly different story.

On Wednesday, Tesla (NYSE:TSLA) shareholders voted to approve the $2.6-billion, 10-year compensation package that has media headlines gushing over the sum, but skirting over the timeframe and the conditions attached.

The compensation plan is directly tied to Elon Musk’s success—and it speaks to the nature of shareholder patience in a very clear way: If Tesla doesn’t hit some specific milestones, Musk doesn’t get paid.

And that’s true in every sense: He receives no salary, no bonuses, no equity. Every penny is directly tied to success.

Or, as Tesla noted in a statement: Musk isn’t going to get paid “simply by the passage of time”.

This is a “100% at-risk performance award, which ensures that he will be compensated only if Tesla and all of its shareholders do extraordinarily well.”

But if he does succeed, the reward will be massive: He could also end up with a 28-percent stake in Tesla, which would be worth around $200 billion.

He’s already worth $20 billion, so a Tesla salary is pretty easy to shrug off. And if anyone likes a challenge, it’s Elon Musk. 

But this is what he’s got to make happen in order to see that payday: Get Tesla to a $650-billion market valuation.

That’s a huge ask. As of today, the company has a $52-billion market cap. And there are at least a dozen other milestones tied to that.

The market-cap goals are lined up in increments with the $2.6-billion compensation package. So, if Musk gets Tesla’s valuation up to $100 billion, he’ll get 1/12th of the package.

It’s not the first time Musk has taken on a challenge of this nature. It’s not even the first time he’s done it with Tesla. Related: Dow Gains Despite Fed’s Rate Hike

So, it should come as no surprise that Tesla shareholders are willing to up the ante—for both. Musk has already taken Tesla from a $3-billion valuation in 2012 to an over-$50-billion valuation today.

And approval came despite a recommendation by an advisory firm to reject the deal as too pricey.

Investor confidence is still there, even if patience is running thin; and for shareholders, it’s all about incentive. 

In the meantime, Tesla stock is down after news that the company wouldn’t meet its Model 3 production targets.

On Tuesday, Tesla shares were down almost 7 percent on the week, and Goldman Sachs put a $205 price target on the company, reiterating a sell rating.

On Wednesday, share prices bought back, regaining almost 2 percent.

(Click to enlarge)

The Tesla bulls are hard to hold back, even surrounded by Goldman Sachs’ skepticism.

Tesla’s missed production targets before. This isn’t the first time, and it won’t be the last. But Musk always delivers, and now he’s got an extra incentive that would make him the richest man in the world.

By Tom Kool for Safehaven.com 

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment