• 657 days Will The ECB Continue To Hike Rates?
  • 658 days Forbes: Aramco Remains Largest Company In The Middle East
  • 659 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,059 days Could Crypto Overtake Traditional Investment?
  • 1,064 days Americans Still Quitting Jobs At Record Pace
  • 1,066 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,069 days Is The Dollar Too Strong?
  • 1,069 days Big Tech Disappoints Investors on Earnings Calls
  • 1,070 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,072 days China Is Quietly Trying To Distance Itself From Russia
  • 1,072 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,076 days Crypto Investors Won Big In 2021
  • 1,076 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,077 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,079 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,080 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,083 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,084 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,084 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,086 days Are NFTs About To Take Over Gaming?
  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