Back in 2012, Tesla CEO Elon Musk signed an agreement with the company that will see him awarded up to 5.27 million stock options (priced at $31.17 a share) following the achievement of various performance goals outlined in the agreement.
While it was expected by many Tesla observers that these goals would be (eventually) achieved, the speed at which the marks have been hit is perhaps a bit surprising to some. Despite the company’s image as being overly optimistic as far as timelines go, things do seem to be improving in that regard — and, most importantly, Model 3 development is roughly right on target.
Given that one of the primary reasons for starting off with lower-volume models was that it would give the company time to work out production kinks before the launch of a mass-market offering, this fact shouldn’t be too surprising. Given some time and experience, many motivated companies (and people) do improve their productive ability….
On that note, our sister site Gas2 provides some interesting information about the aforementioned:
Musk earns one tenth of the options every time Tesla hits a pair of goals — one tied to its market value and another to the company’s operations. He has already achieved seven targets tied to the growth of Tesla’s market capitalization. He has only achieved five of the operational targets, however. Still, that entitles him to half of the options, or 2.64 million shares of stock. At the end of the trading day last Friday, those shares would be worth $589 million.
Musk has already guided the company to the introduction of the Model S and Model X. The Model 3 is scheduled to go on sale in late 2017. More than 400,000 people have reserved one to date. Tesla has also begun selling its Powerwall and Powerpack energy storage batteries to residential and commercial customers.
What does Musk have to do to qualify for all the options? Before 2022, he needs to boost Tesla’s value another 28% to $43.2 billion. He also has to maintain a 30% gross profit margin for four quarters, bring the company’s total production to 300,000 vehicles and bring the Model 3 to market. This month, six analysts set 12 month price targets for Tesla stock of $325 or more. At that price, the company’s total valuation would exceed the minimum target established in the option agreement.
Interestingly, the achievement milestones were considered to be very difficult to achieve back when they were devised, according to the company. A recent filing with the SEC stated: “Many of the requisite milestones were viewed as very difficult to achieve.”
A Tesla spokesperson named Khobi Brooklyn commented that the April 15 SEC filing was the company’s “official comment” on the matter.