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Musk Eyes A $750 Million Payday

Musk

Tesla's Elon Musk could soon be taking $750 million through his unique pay structure offering him zero in salary or cash bonus. Tesla's stock has been breaking the shackles caused by the Coronavirus and plummeting oil prices.

Soaring past $800 per share on Tuesday, Tesla’s stock performance has hit the minimum requirement for Musk to receive his bonus -- requiring a six month average of $100 billion in market cap. It reached $145 billion this week, and around $96 billion for the latest six-month count.

In this two-year old contract with Tesla shareholders, Musk has the option to buy 1.69 million Tesla shares at $350.02 each. Taking Monday's Tesla closing stock price of $798.75, Musk could sell those shares for a profit of $758 million — once it reaches that $100B/6-month average mark. If Musk were to tap into the entire extent of the agreement from 2018, it would eventually be a full payoff for Musk that would surpass anything previously granted to U.S. executives.

Shareholders will be looking at the financials and the electric automaker’s overall performance during the quarterly report scheduled for Wednesday. They’ll participate in the usual Q&A with Tesla management after the financials are released.

Shareholders will want to hear about the status of the company’s Fremont, Calif., plant, which may continue to have its shutters drawn during the Covid-19 pandemic that started with its March 23 closure. Tesla stock leaped more than 10 percent after Musk teased that the Fremont plant could be re-opened as early as Wednesday of this week; that was later softened after a CNBC report claimed the company had canceled plans to bring some employees back to work with state and local enforcement being strict. San Francisco Bay area health authorities want to extend the shelter-in-place orders.

Musk has been playing off public pressure for governments to open up their social distance mandates through a series of tweets late Tuesday.

“Give people their freedom back!” Musk posted, as he promoted Wall Street Journal analysis that suggested closures don’t save many lives. “Bravo Texas!” Musk tweeted, highlighting a Texas Tribune story that said the state’s restaurants and other businesses can reopen Friday.

In another tweet, the Tesla chief agreed with another user who said the U.S. should carefully peel back restrictions — while continuing to keep social-distancing measures in place.

For an early performance evaluation ahead of the shareholder’s call, vehicle deliveries have looked very good. The company had already released its first quarter numbers stating that it had reached its best first-quarter ever 88,400 deliveries and the production of 102,672 cars. Those numbers have been crucial for the company, since vehicle sales represent the automaker’s main revenue stream at this time. It helped that the electric carmaker beat Wall Street expectations after the start of the coronavirus pandemic in the US.

Tesla did cut staff at its Nevada battery factory by 75 percent last month, around the same time it shut down its California vehicle assembly plant. Other automakers have kept their vehicle production assembly plants closed during this time, and most of them have been making announcements about April and May reopening having to be rescheduled for now.

Dealers have been reporting steep drops in visits to its showrooms, and purchases of new and used vehicles.

Analysts think that Tesla starting production at its Shanghai plant has helped, along with interest in its upcoming Tesla Model Y crossover vehicle. There’s also expectations that its investments in even more Model 3s being produced, its battery energy storage unit, electric pickup and commercial truck concept vehicles, and overseas plants spreading its share in China and Europe, offer long-term potential for strong market valuation.

Other major global automakers — such as General Motors, Ford, Fiat Chrysler, Toyota, Honda, and BMW — have witnessed the typical corporate stock drop this year following emergency notices about Covid-19. One competitor, BYD, has been closer to Tesla in stock price fluctuation and performance over the past six months. BYD has been taking a similar approach, although more gradual and quiet than Tesla’s, by expanding it product lineup and gaining a foothold in electric buses and commercial vehicles.

By Jon LeSage for Oilprice.com

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