Elon Musk, the billionaire CEO of Tesla has the potential of receiving his fourth of 12 option tranches related to his 2018 compensation package. Elon Musk has seen his wealth soar this year, despite the ravaging impact of Covid-19 on the Economy.
The compensation awards are based on two criteria: Tesla’s operational goals, related to revenue and profits, and it’s market capitalization.
Musk has achieved the criteria the first criterion for the fourth tranche, a six-month average market capitalization of $250 billion, according to Business Insider. The company passed the $250 billion benchmark for the first time in July. Tesla’s market value stood at $391 billion on Tuesday.
The upcoming Tesla’s earnings report will determine whether Elon Musk gets the fourth tranche of the compensation package. For that to happen, the company would have to hit trailing 12-month adjusted Ebitda of $4.5 billion.
In the trailing 12 months through June, Tesla hit $4.42 billion in adjusted Ebitda, just shy of the $4.5 billion target.
Musk is entitled to compensation packages made of a series of Tesla options awards, which will allow him to buy a fixed amount of Tesla shares at a discount to the current stock price.
Each tranche qualifies Musk to purchase 8.44 million shares at $70 per share. Based on Wednesday’s closing price, the fourth tranche of Musk’s pay package would be worth over $3.6 billion and will cost him just $591 million. If Musk turned around and immediately sold his shares in the open market, he would take home more than $3 billion in profit.
An analyst at JPMorgan expects Tesla to record third-quarter adjusted Ebitda of $1.183 billion, which would raise its trailing 12-month adjusted Ebitda to just above the $4.5 billion target.
Tesla is still $10 billion short of hitting Musk’s trailing 12-month revenue target of $35 billion, which would unlock an additional payment tranche.
By; Ifunanya Ikueze