Tesla’s seemingly unstoppable increasing share price is getting the electric automotive and solar power business valuation close to where co-founder, CEO and product architect Elon Musk can trigger the first part of a US$50 billion incentive package designed to keep him at the helm of the business.
Tesla’s shares gained another 2.5% on Tuesday, closing in on another all-time high of US$538 a share, valuing Tesla’s equity at US$97 billion.
If Tesla stock reaches US$554.80, the business would be valued at US$100 billion. Tesla then has to maintain that valuation for six months to unlock the first of several incentive-based share payments to Elon Musk, worth just under US$350 million, reported the Financial Times.
That would see the 48-year-old billionaire get one of the largest bonuses in the corporate world.
In addition, the increased value of Elon Musk’s 18.9% stake in Tesla, which has doubled in six months to $18.3 billion, is the bigger prize.
Tesla’s share price surge has been propelled by increased vehicle delivery numbers, bullish price targets by analysts and Tesla making a big play in the world’s largest car market – China. Tesla is now building more than 1,000 Model 3 sedans a week at its new Gigafactory 3 in Shanghai, China, which was built in 10 months. Additionally, Musk announced last November that he is to build a European GigaFactory in Berlin, Germany. Tesla began with its Gigafactory 1 near Reno, Nevada, and a main vehicle manufacturing facility at a Tesla Factory in Fremont, California.
On Monday, as The CEO Magazine reported, analyst Colin Rusch, of Oppenheimer, massively raised his Tesla price target to US$612 and on Tuesday, investment bank Jefferies raised its target price on Tesla to US$600, calling Tesla “the only carmaker engaged in a positive-sum game in EVs amid rising market acceptance”.
Elon Musk’s rewards scheme was put in place in 2018, replacing any regular salary, bonus or share scheme with the promise of ever-greater payouts if targets were hit. Forbes states his net worth as of January 14 at US$30.8 billion.
For Elon Musk to unlock the full US$50 billion bonus by 2028, he and his team have to increase Tesla’s annual revenues to US$175 billion – it is about US$24 billion today. In addition, he needs to raise underlying earnings to US$14 billion, from about US$2 billion today, and its market capitalisation to US$650 billon.
At the time the scheme was introduced, Tesla was valued at US$59 billion, and barely profitable.
Another payment will come if the market value reaches US$150 billion, and again at every further US$50 billion up to US$650 billion, if additional financial targets of higher revenues or fatter profits are also hit.
To qualify, Elon Musk has to stay CEO.
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