Elon Musk likely getting $15 Billion in options After Tesla’s Record Quarter

Published: April 22, 2022
Updated: April 22, 2022
Elon Musk
Elon Musk 1

Elon Musk is expected to get $15 billion in stock options. Following Tesla’s Record-Breaking Quarter

Following Tesla’s announcement of record revenue and profits for the first quarter of 2022 on Wednesday, 16.9 million of CEO Elon Musk’s options worth $15.3 billion (before taxes) are expected to vest–the remainder of his lucrative 2018 performance award.

The Tesla founder’s massive bonus comes at an opportune time as he moves forward with his hostile $43 billion bid to acquire Twitter.

Following Tesla‘s announcement of record revenue and profits for the first quarter of 2022 on Wednesday, 16.9 million shares may have vested in CEO Elon Musk’s $15.3 billion (before taxes) options—the remainder of his lucrative 2018 performance award. Musk can earn up to two stages of Tesla options from this award each quarter if Tesla meets certain revenue, earnings, and stock price targets.

Elon Musk would have to pay $70.01 per share to exercise these Tesla options, which is less than 10% of the company’s closing stock price of $977.20 per share on Wednesday. While the cash-strapped Musk will have to hold those shares for the next five years, he’s gained some additional borrowing power, as Tesla’s policy allows them to hold up to 25% of the value of the shares as collateral for loans. 

You can use this feature to pledge your stock. , Without taking into account potential vested new options, Musk has already pledged more than half of his 21 percent Tesla stake as collateral for the loan – some of which was withdrawn when the shares fell too low.

Also Read Apple Begins Manufacturing the iPhone 13 in India.

Elon Musk‘s 2018 performance award originally included 101.3 million options divided into 12 phases, with two tranches vesting each quarter based on Tesla’s simultaneous achievement of two set milestones: one related to market capitalization and the other to annual revenue or annual adjusted EBITDA.

The first market cap milestone was achieved after Tesla reached a $100 billion valuation in January 2020, with each subsequent tranche tied to a $50 billion increase above that initial level (for the purposes of Musk’s award, Tesla’s market cap is measured on both a six-month and 30-day trailing average). With Tesla’s market capitalization approaching $1 trillion as of Wednesday and averaging more than $800 billion over the past year, Musk has had the $650 billion level required to unlock the 12th and final tranche in his rearview mirror for quite some time. is now in.

Tesla and Musk have been gradually approaching annual revenue and annual adjusted EBITDA milestones since 2020, two tranches after the company reported annual adjusted EBITDA of more than $10 billion for the fourth quarter of 2021.

Elon Musk

Those final tranches will most likely be contained after reporting annual revenue of more than $55 billion and annual adjusted EBITDA of more than $12 billion for the first quarter of 2022.

Tesla is heading in that direction, with gross margins of 29 percent in the first quarter of 2022, 27 percent in the previous two quarters, and 24 percent in the first three months of 2021. Those options, with an exercise price of only $6.24 per share, would have been worth $2.6 billion if they had vested on Wednesday.

That may appear to be a small sum for the world’s richest man, whose fortune surpassed that of runner-up rival Jeff Bezos by $83 billion before Wednesday’s potential option vested. But, despite his recent thoughts on retirement on Twitter and subsequent attempt to take over the social network, that may be enough to keep him focused on his electric car maker.

Musk, for his part, stated on the company’s earnings call that he has “never been more optimistic or excited about Tesla’s future,” adding that the company is still in the early stages of its journey, “basically our goals.” towards 5%.

And, according to Musk, his enthusiasm is unrelated to future compensation. “There’s no talk about incremental compensation for me,” he said.

This should provide some relief to Tesla shareholders.

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