Elon Musk Can Pocket Another $32 Billion of Tesla Shares

04/30/2021 | 06:08pm
Elon Musk

By Theo Francis

Elon Musk, already one of the world's richest people, can add another $32.4 billion worth of Tesla Inc. shares to his piggy bank.

The technology entrepreneur is now vested in stock options valued at that amount after the electric-car maker hit roughly half of the targets laid out by the board in his landmark 2018 compensation package, according to a securities disclosure filed late Friday. Mr. Musk is poised to receive approximately $10.8 billion more when Tesla hits other targets soon, the company said in separate securities filings this week.

Tesla made the grant of stock options on 101.3 million shares three years ago, when Tesla's shares traded at around $70 on a split-adjusted basis. As a result, Mr. Musk's cost to exercise his 50.66 million vested options -- or convert them into shares -- is $70.01 apiece. Tesla shares closed Friday at $709.44.

In the securities filing, Tesla said the company had achieved six of 12 operating targets, and said two more were probable soon. Most of the targets reflected an adjusted version of earnings before interest, taxes, depreciation and amortization. Two represented revenue targets. Earlier this week, Tesla posted a record quarterly profit despite supply disruptions.

Tesla has also reached 11 of the pay package's 12 market-capitalization targets, which started at $100 billion and were spaced at $50 billion intervals up to $650 billion, the company said. Each market-cap milestone must in effect be paired with an operating milestone, which has served as a limiting factor.

Mr. Musk, Tesla's chief executive, could still gain stock options on another roughly 40 million shares if Tesla continues to meet additional operating milestones, and the award could pay out in full if the company's market capitalization also rises above $650 billion and stays there for six months. Tesla closed Friday with a market cap of $649.82 billion.

Mr. Musk has until 2028 to exercise the options and must hold the shares for five years.

Tesla didn't immediately respond to requests for comment.

Mr. Musk doesn't accept a salary from Tesla and instead is compensated with stock awards. His wealth is tied largely to his stake in the company, whose market capitalization surged as investors poured money into electric-vehicle makers. As of Dec. 31, Mr. Musk owned about 22.4% of the company's shares outstanding, up from 20.8% a year earlier.

The billionaire has used his Tesla holdings as collateral to borrow funds. As of 2020, the CEO had pledged more than 92 million of his 227 million Tesla shares to secure personal debts, up from 18.5 million a year earlier, according to a filing. At Friday's closing price, the pledged shares are worth about $65 billion.

Mr. Musk doesn't like selling stock, though he has sold some to cover taxes on past stock options. He told The Wall Street Journal in 2016 that he planned to never sell his Tesla shares.

Last year, Mr. Musk listed three of his California mansions for sale and said he was selling most of his possessions. The executive later said he had moved to Texas -- a state that doesn't collect state income or capital-gains tax for individuals.

Write to Theo Francis at theo.francis@wsj.com

(END) Dow Jones Newswires

04-30-21 2008ET

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