Tesla seeks to award Elon Musk $1tn if carmaker hits formidable targets Billionaire would need to hit a series of market value and profit goals to earn payout

 

 Elon Musk really does do things no one else has. Chief among them: squeeze unprecedented paychecks from electric-car maker Tesla (TSLA.O), opens new tab. On Friday, the company’s board proposed to award, opens new tab its CEO up to $1 trillion in stock. Becoming the world’s first trillionaire requires hitting goals that range from eyebrow-raising to eyeball-popping. It’s also an example of Tesla’s bizarre governance.

This package aims to decisively refocus Musk after he joined and then left the White House, promised to start a political party, and threatened to go elsewhere if he didn’t get bumped up to 25% voting control. That last part is key. Despite tumbling sales and profitability, the company’s valuation stays afloat on promises of robotic humanoids and self-driving taxis.

Tesla’s bargain is that Musk gets what he wants, but only if he sticks around to keep the magic going. Like a mere $56 billion pay package in 2018 – which a judge nixed for being preposterously huge – this one is entirely contingent on benchmarks. For Musk to see a cent, Tesla’s market value must double while hitting either a goal related to product sales or profitability. The milestones increase steadily, unlocking up to 12 tranches of awards as each pair is surpassed. To win it all, Tesla must reach an $8.5 trillion market valuation, eightfold from where it is now, and notch $400 billion in EBITDA by 2035.

It’s a huge leap from this year’s expected $12 billion of such profit, according to Visible Alpha. The only slight acknowledgement of reality is that the twin goals imply an enterprise valuation of roughly 21 times EBITDA. Sure, Meta Platforms, opens new tab trades at only 17 times. But Tesla’s current multiple stands at nearly 83.

Other milestones seem fuzzier. A goal to deliver 20 million vehicles in total compares to Musk’s long-since-dropped target to sell that many cars annually. Meanwhile, a criterion of one million robotaxis seems disappointing after Musk pledged that every car Tesla ever sold would become a rentable, automated chauffeur.

To boot, the awards are oddly structured. The entire unearned pool of restricted stock that Musk can receive effectively gains voting power immediately, before the CEO hits a single goal. Until he does achieve an objective, though, the associated shares vote in proportion with everyone else – so he can't swing a board election, say, against other investors. Nonetheless, this arrangement does allow him to control how these shares vote as soon as he wins a tranche of stock, long before it vests.

Combined with a recent bylaw change preventing lawsuits from investors owning less than 3% of Tesla, Musk is looking to insulate his control, the exact kind of governance madness that earned a judge’s ire in the past. At the very least, shareholders stand to be rewarded for tolerating the insanity.

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Tesla has just unveiled a massive new potential pay package for Elon Musk.

The proposed compensation plan, which the EV giant outlined in an SEC filing on Friday, could net Musk as much as $1 trillion if he can hit a series of ambitious milestones that include taking Tesla to an $8.5 trillion market cap by 2035.

In addition to adding an extra $7.5 trillion in market value — which would make Tesla twice as valuable as Nvidia — the proposed pay package is contingent on Tesla having delivered a cumulative total of 20 million cars and one million of its Optimus robots in the next decade.

Musk would also need to put 1 million robotaxis on the road, and boost the number of subscribers to Tesla's Full Self-Driving service by 10 million.

The Tesla CEO would have to grow the company's earnings before interest, taxes, depreciation, and amortization to $400 billion over the next 10 years, up from $16.6 billion last year.

The full proposed package would tie Musk to Tesla for at least the next decade, with a minimum of 7 and a half years before the first tranche of shares vests. One of the final objectives needed to unlock the full package, which is released in tranches over 10 years as goals are met, is for Musk to develop a "CEO succession framework."

Tesla chair Robyn Denholm told CNBC Friday that the package's goal is to keep Musk "motivated and focused on delivering for the company."

"If he performs, if he hits the super ambitious milestones that are in the plan, then he gets equity — it's 1% for each half a trillion dollars of market cap, plus operational milestones he has to hit in order to do that," she said.

The compensation plan, which will now be voted on by Tesla shareholders at the company's annual meeting in November, comes after Musk's previous pay package was struck down by a Delaware judge last year.

Tesla has appealed the judgment against the $46.8 billion pay package. Last month, the company's board awarded Musk $29 billion worth of shares as an interim performance award.

Musk has frequently said he should be granted more voting control over Tesla, and hinted that he could spend less time on or even leave the EV giant if he doesn't.

The new giant pay package comes as Tesla grapples with a global sales slump, fuelled in part by backlash over its billionaire CEO's political interventions. The company's share price is down 16% so far this year.

𝐓𝐞𝐬𝐥𝐚'𝐬 $𝟏𝐓 𝐩𝐚𝐲 𝐩𝐚𝐜𝐤𝐚𝐠𝐞 𝐢𝐬𝐧'𝐭 𝐚𝐛𝐨𝐮𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞. 𝐈𝐭'𝐬 𝐚𝐛𝐨𝐮𝐭 𝐜𝐨𝐧𝐭𝐫𝐨𝐥.

Tesla's board has proposed a new compensation plan for Elon Musk that could be worth a staggering $1 trillion.
In short, here’s why it feels less like an incentive and more like a ransom:

▪️ 𝐀 𝐏𝐨𝐰𝐞𝐫 𝐏𝐥𝐚𝐲, 𝐍𝐨𝐭 𝐚 𝐏𝐚𝐲 𝐏𝐥𝐚𝐧: This isn't just about money. The package is structured to deliver the ~25% voting control Musk has demanded, making it feel more like shareholders are paying to prevent him from walking away.
▪️ '𝐀𝐥𝐥-𝐨𝐫-𝐍𝐨𝐭𝐡𝐢𝐧𝐠' 𝐈𝐠𝐧𝐨𝐫𝐞𝐬 '𝐑𝐢𝐠𝐡𝐭-𝐍𝐨𝐰': The targets are astronomical (an $8.5T valuation!). This moonshot vision conveniently distracts from current realities: plunging sales, a falling stock price, and fierce competition.
▪️ 𝐂𝐨𝐮𝐫𝐭𝐫𝐨𝐨𝐦 𝐃é𝐣à 𝐕𝐮: A judge already struck down his last record-breaking pay deal as excessive. Proposing an even larger one while that case is still under appeal is a direct challenge to corporate governance and shareholder oversight.

So while this is being sold as a plan for historic growth, it looks more like a high-stakes move to consolidate one man's control over the company's future.