Elon Musk might not have to wait long for huge payday
New York(CNN Business) Elon Musk's big payday may be closer than you think.
As part of a pay package approved by shareholders in 2018, the Tesla CEO stands to get options to buy 1.7 million shares of Tesla shares once the company has achieved a $100 billion market value over a period of six months, as well as hitting certain financial performance targets it has already achieved.
Tesla didn't cross the $100 billion market cap threshold until a few weeks ago, on Jan. 22, but Musk could qualify for this first batch of options later this spring.
That's because the Tesla (TSLA) stock continues to soar past that $100 billion market value.
As of Tuesday's close, the company's market value stood at $139.6 billion, making it the second most valuable automaker in the world behind Toyota (TM). Yet Tesla only has a sliver of the sales of the more established automakers whose stock value it now dwarfs, such as Volkswagen (VLKAF), General Motors (GM) and Ford (F).
If the average price of Tesla stock stays at Tuesday's closing price of $774.38 for the next several months, the stock could achieve that $100 billion average over a six-month period as soon as April 17.
The pay package has the potential to make Musk the richest man in the world if Tesla continues to grow.
The top target will be paid out if Tesla reaches a market value of $650 billion, more valuable than all but four US companies today - Apple (AAPL), Microsoft (MSFT), Amazon (AMZN) and Google parent Alphabet (GOOG). But there are a dozen steps he can take to reach that lofty goal, and each could get him an additional 1.7 million options.
At Tuesday's closing price of $774.38, this first batch of Tesla options would have a value of $716.6 million, the difference between that and the $350.02 exercise price. Each subsequent tranche of options would be even more valuable, because the stock price will have risen while the exercise price stays the same.
Under terms of the package, Tesla hasn't had to pay Musk anything - no salary, not a single stock option. But that is likely to change soon.
Tesla shares have been on an impressive run in the last eight months, as the company proved to investors it could become profitable.
Since hitting a 52-week low in early June, Tesla shares are up 338%. And they're up another 85% this year.
If the share price continues to climb through March, it's possible that Musk will qualify for the first big payday before the end of the quarter. Shares were up a little less than 1% in midday trading Wednesday.
