Elon Musk’s holdings of Tesla stock have lost about $30 billion this year through Monday’s close, as the stock slid 12%. But the next 12 months could be the most lucrative ever for Musk. If analysts are correct, Tesla will report strong financial results this year that will net Musk billions of dollars in stock awards.
Musk doesn’t receive any base salary or cash bonus from Tesla. Instead, he receives stock options based on the company hitting certain financial and market value targets. His 2018 pay package allocated 101 million split-adjusted shares that would be awarded to Musk in 12 equal tranches, as the company hit those benchmarks.
The market value benchmarks have all been achieved, even though Tesla’s recent slide has removed it from the list of companies with a trillion-dollar market cap. And seven of the financial targets have been hit so far, with two being reached in 2019, two more in 2020, and three in the first nine months of 2021. So he’s already received 59 million of the 101 million options in that package.
Analysts expect Tesla to hit the remaining five financial targets this year to give Musk all the options he possibly could get under that 2018 package. If they’re right, he’ll qualify for four of the tranches this year — a record for him — and one more in early 2023 once fourth quarter 2022 results are officially in the books.
“With Tesla’s growth trajectory, I’d be surprised if he doesn’t get all five tranches this year based on hitting all the triggers,” said Dan Ives, a tech analyst for Wedbush Securities.
Each of the tranches of options would give him the right to purchase 8.4 million shares of stock for the bargain price of $70.01 a share — the price of the stock when the options were first granted in 2018. At Monday’s closing price of $930, that means each tranche of options would be worth $7.3 billion, and all five tranches would total $36.3 billion.
He’s very likely to qualify for at least one tranche of options, perhaps two, when Tesla reports fourth-quarter results on Wednesday. He should have at least three tranches in hand once the first-quarter results are reported in April and the fourth tranche by mid-year.
“We think strong Tesla earnings could be a life raft for its shares,” he said.