Saturday, 15 December, 2018

Elon Musk to get no compensation unless Tesla hits milestones

Credit PA Credit PA
Nellie Chapman | 24 January, 2018, 12:21

Under a new all-or-nothing pay package, Musk would remain at Tesla Inc. for the next decade and see his compensation tied to ambitious growth targets.

Finding and retaining the best people has to be job one, and the Tesla board just made another bold move to do just that. Again, each tranch depends not only on Tesla's market cap, but operational milestones too. Thus, for Musk to fully vest in the award, Tesla's market cap must increase to US$650 billion, the company said.

Not all analysts are as optimistic though, given that Tesla has repeatedly missed production targets, is yet to make a profit and burnt through nearly US$500,000 an hour past year, according to Bloomberg.

For each tranche, Musk will vest in stock options that correspond to about 1.69 million shares, or 1 percent of Tesla's current total outstanding shares.

Tesla just announced Elon Musk's new all or nothing, long-term performance award, ultimately confirming that the billionaire visionary will stay on as the electric vehicle maker and energy company's chief executive for the next ten years.

If the goals are reached, Tesla would be one of the biggest companies in America, and Musk's wealth would grow exponentially.

Tesla's operational milestones for the next ten years requires the electric auto maker to meet a set of escalating Revenue and Adjusted EBITDA targets.

Tesla's shares, which gained 46 percent past year, closed 0.3 percent higher at $352.79.

Musk 'will receive no guaranteed compensation of any kind - no salary, no cash bonuses, and no equity that vests simply by the passage of time, ' Tesla said. The goal is for the electric vehicle company to grow to $650 billion in market value; as it stands the company sits at just over $60 billion. That plan resulted in a 17-fold increase in Tesla's market cap within five years, Tesla points out, claiming that milestones in the new award align even more directly with shareholder value creation than those in the old plan. While the plan would allow for Musk to earn billions more, if he doesn't reach the milestones, he would get nothing. To date, all of those market cap milestones and 9 of the 10 operational milestones have been met.

On a long-term look, the deal hinges on Musk staying on as CEO at Tesla.

Long story short, it's all or nothing for Musk. Musk hoped Tesla would be making 20,000 Model 3s each month by the end of 2017, but delays, production and delivery issues kept the company well below its goal.

He has founded several companies, including rocket maker SpaceX and The Boring Company - leading some to speculate that his interest in leading Tesla could eventually wane.

Almost six months later, the company has yet to emerge at the other end, the result of "robot calibration issues" at the Fremont, California, auto assembly plant and other challenges at Tesla's "Gigafactory" battery plant in Nevada.