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Tesla Inc. (NASDAQ:TSLA) Chief Executive Officer Elon Musk is on the verge of a very big payday.
Shares of Tesla surged 10% on Monday ahead of the company’s quarterly report this week, and in anticipation that it could soon reopen its Fremont, California plant. Monday’s rally put Tesla’s market capitalization at $145 billion.
Importantly for Musk, its stock market value reached a six-month average of $96 billion. Hitting a six-month average of $100 billion would trigger the vesting of the first of 12 tranches of options granted to the billionaire to buy Tesla stock as part of his pay package.
Each options tranche gives Musk the option to buy 1.69 million Tesla shares at $350.02 each. Taking Monday’s Tesla closing stock price of $798.75 as an example, Musk could sell those shares for a profit of $758 million.
Musk receives no salary or cash bonus, only options that vest based on Tesla’s market capitalization and milestones for revenue and profit growth. A full payoff for Musk, who is also the majority owner of the SpaceX rocket maker, would surpass anything previously granted to a U.S. executive.
Musk’s subsequent options tranches would vest at $50 billion increments of Tesla market capitalization over the agreement’s 10-year period, with him earning the full package if Tesla’s market capitalization reaches $650 billion and the electric vehicle maker achieves several revenue and profit targets.
Tesla’s quarterly report on Wednesday will show the damage done to global demand by the COVID-19 pandemic and the extent to which a recovery from the coronavirus in China, and a return to production at its Shanghai plant, are helping the U.S. carmaker.
Analysts on average expect March quarter revenue to jump 30% to $5.9 billion U.S., according to Refinitiv. That consensus revenue estimate is down from $6.7 billion U.S. at the start of February. Analysts on average expect a non-GAAP loss of 36 cents per share.