Musk could pocket $88 billion bonus if Tesla dreams come true

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Tesla unveils 10-year plan to reach $A800 billion in market value by becoming the world’s first vertically integrated sustainable energy company. That means going big in solar, EVs and battery storage, and would make Elon Musk the world’s richest person.

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Tesla has unveiled an extraordinarily ambitious plan to become one of the biggest companies in the world, aiming to reach $US650 billion – $A812 billion – in market value within 10 years.

The target was revealed in a new 10-year performance plan for company founder, president and CEO Elon Musk, who stands to reap the word’s biggest ever pay-day – $US70 billion ($A87 billion) by some estimates – if he can deliver.

He will get no salary if he fails to reach any of the milestones, but if he does deliver his total stake in Tesla could rise to around 28 per cent, or $US181 billion ($A226 billion), making him the richest man in the world.

To put the ambition in some context, Tesla is now valued at around $US58 billion, putting it about level with General Motors, and ahead of Ford, as the most valuable car manufacturer in the US, despite only achieving a fraction of the sales.

To reach this new target, Tesla will need to overtake the current value of all companies in the world, with the exception of Apple, Amazon and Alphabet (Google), and add its current value to its stock every year for the next 10 years.

Important revenue and profitability goals would also have to be achieved.

Tesla hopes to do this through what it cutely calls the Master Plan “Part Deux” (no explanation for why it needs to use the French word for “two”), which aims to build the world’s first vertically-integrated sustainable energy company.

This will include generation, storage and consumption. The plans include expanding solar energy generation through the recently launched (but yet to take off) Solar Roof and other solar products and “seamlessly integrating them with battery storage”.

Tesla also proposes to build out its electric vehicle product line to cover “all major forms” of terrestrial transport, “continuing to advance autonomous technology to create a fully-self driving future, and enabling sharing so that your car can make money for you when you aren’t using it.”

The board, in a letter to shareholders, admitted that “our aspirations may appear ambitious to some, and impossible to others, and that is by design.

“We like setting challenging, hard-to-achieve goals for ourselves, and then focusing our efforts to make them happen. This is why we based this new award on stretch goals and why we gave Elon the ability to share in the upside in a way that is commensurate with the difficulty of achieving them.”

Tesla, of course, is yet to make a profit, and is often criticised for falling short of its own ambitious production goals, most recently for the delays in meeting production targets for the “mass-market Model 3 electric vehicle.

Despite this, Musk has turned the world of space travel, car travel and energy markets upside down through the launch of its SpaceX shuttles, its Model S, Model X and Model 3 electric vehicles, and its Powerwall and Powerpack battery storage products.

The installation of the world’s largest lithium-ion battery, the so-called Tesla big battery in South Australia, is causing the energy industry to start to rethink the way that energy markets and the delivery of electricity works.

Source: Tesla

Musk also has big plans for the Tesla truck, the solar roof, and his Boring company, which wants to build a network of tunnels that can transport people across cities in pods at breath-taking speed.

Tesla said in a statement that the award is modeled after Musk’s 2012 performance award, which helped bring about a more than 17-fold increase in Tesla’s market cap in the five years after it was put in place.

“Elon will receive no guaranteed compensation of any kind – no salary, no cash bonuses, and no equity that vests simply by the passage of time,” the company said in a statement.

“Instead, Elon’s only compensation will be a 100% at-risk performance award, which ensures that he will be compensated only if Tesla and all of its shareholders do extraordinarily well.

“Because all Tesla employees are provided equity, this also means that Elon’s compensation is tied to the success of everyone at Tesla.”

Analysts said the “incremental value” of the long term bonus scheme could deliver up to $US70 billion to Musk, but given that he already owns a significant stake in the company, the package is more about attracting other talent.

“We see Elon Musk’s ambitious long-term awards plan as an aspirational marketing tool to attract talent and capital ahead of an upward inflection in competition for EVs and AVs,” Morgan Stanley analysts wrote.

“Elon Musk is already ‘all-in’ on Tesla, so the true marginal financial incentive for tranche vesting is open to debate,” the analysts wrote.

“While the numbers embedded in the incentive package imply incremental compensation of over $70bn, we view this incentive package as more important to investor confidence than to Musk financially.”

They said the package precedes what is expected to be an unprecedented era in the battle for capital and talent.

“For much of Tesla’s history as a public company, the company has all but monopolized the OEM investment debate for Auto 2.0. Over the next 12 months, we anticipate that Tesla’s scarcity value amongst entities vying for supremacy in the new ecosystem will be challenged.”

Musk’s performance award consists of a 10-year grant of stock options that vests in 12 tranches. Each of the 12 tranches vests only if a pair of milestones are both met.

The market cap milestones require Tesla’s current market cap to firstly increase to $US100 billion, and then add an additional $USUS50 billion in eleven increments.

To meet the operational milestones, Tesla must meet a set of escalating Revenue and Adjusted EBITDA (earnings before interest tax, depreciation and amortisation). They are designed to ensure that as Tesla’s market cap grows, the company is also executing well on both a top-line and bottom-line basis.

Of course, to receive the bonus, Musk must remain as Tesla’s CEO or serve as both Executive Chairman and Chief Product Officer, putting to rest speculation that he might step down or hand over the reigns.

“This ensures that Elon will continue to lead Tesla’s management over the long-term while also providing the flexibility to bring in another CEO who would report to Elon at some point in the future,” the company said.

“. Although there is no current intention for this to happen, it provides the flexibility as Tesla continues to grow to potentially allow Elon to focus more of his attention on the kinds of key product and strategic matters that most impact Tesla’s long-term growth and profitability.

The package will be put to a vote of Tesla’s shareholders in late March. Musk and his family members will not be able to vote on the package.

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40 Comments
  1. MaxG 10 months ago

    I think ‘world domination’ puts a negative connotation on something that is actually desirable. I for one wish Elon every success — the world needs people like him, and one needs muscle to fight the incumbents = procrastinators in their own game.

    • Brian Tehan 10 months ago

      I agree. Musk is surfing a wave of technology change and he’s willing to take risks to be out in front. So far he’s been proven right. Sanjeev Gupta is another billionaire who has a vision of the future and, fortunately for Australia, he’s decided to invest billions here. They are disruptors of the status quo in a good way – that benefits the environment.

      • Gavin 10 months ago

        I feel that Elon’s track record and vision are to be supported and therefore rewarded. He has shown that he is committed to the cause of transforming energy and transportation away from Fossil Fuels, and I will always be in awe of when he made all Tesla’s patents free. Not only that he did it, but clearly the Tesla board and shareholders supported him and the value of the company has only increased.
        The world needs more of this and I look forward to what Elon, Tesla and Sanjeev bring next!

  2. Robert Comerford 10 months ago

    I don’t believe anyone is worth a million dollars a year unless they invent a cure for cancer, however in the case of Elon I might be able to make an exception.

    • Joe 10 months ago

      I am with you on this value thing. CEO’s on their bloated mega salary packages are not worth a fraction of what they pull. For the Elon I think he sees his ‘reward’ as being his ideas actually becoming reality in everyday life. If and when all that wealth does come his way, what is his going to with it. I doubt it would make him that much happier than he already is and you can only spend so much dosh buying stuff.

      • Ken Dyer 10 months ago

        My immediate thought is that Elon Musk is actually doing something useful for his money, and it benefits the World as a whole. His fortune is earned not inherited, so he understands the value of money. He earned his money like Bill Gates, who is also giving it away.

        When you compare them with the likes of Murdoch, Packer, Trump and Reinhardt, who have inherited vast sums of money, have never been financially threatened in their lives by being born into a world of entitlement and privilege, and yet assuage their consciences by miniscule donations to charity when compared with their net wealth, at the same greedily growing their wealth, you begin to understand what is wrong with capitalism, and indeed the World.

        • solarguy 10 months ago

          Capitalism wouldn’t be so bad if they paid their fair share of taxes and let the little guy have a tax break.

          • Joe 10 months ago

            Solarman, you may have missed yesterday’s presser by our Treasurer Scotty… the little Aussie Worker Battlers are going to get their personal tax cuts before those promised Company tax cuts happen. Not sure why Companies need a tax cut when they aren’t paying the headline rate in the first place. They actively deliver tax cuts for themselves with all their grandiose avoidance schemes. So no need for Treasurer Scotty to trouble himself with Corporate tax cuts.

          • solarguy 10 months ago

            Let’s face it Joe, the working class are slaves for the most part. Those that have two working in a household 40-70 hours/week for $30/hour, just to get ahead after paying mortgage, insurance and other living costs, haven’t got much of a life really. The miss family and friends because they chase all the over time they can get, but pay huge tax. If one of them develops a health problem it becomes a bloody financial disaster.

            Meanwhile the corporate world keep increasing prices on everything, sucking the blood dry of the slaves.

          • Barri Mundee 10 months ago

            Capitalism needs to be tamed. That requires regulation and outright bans on certain activities. Banks (OZ banks at least) should be banned from any involvement in financial advice as they have shown they do not act in the best interests of clients.
            They should be restricted to loans and faciltiating the transactions of banking.

          • solarguy 10 months ago

            Just one of the problems that need to be sorted Barri! Hell we could go on for hours.

          • Hettie 10 months ago

            Agreed.

        • wideEyedPupil 10 months ago

          You think Gates “earned” his money? Stole more like.

      • Barri Mundee 10 months ago

        Most CEO’s are not worth their often very generous packages with the hurdle for their rewards often very low, particularly in this country. “Slash and burn” short-termism such as cutting staff has tended to be rewarded instead of genuine innovation and entrepreunism.

      • wideEyedPupil 10 months ago

        buy political influence maybe… which is the down side of even people we like getting as wealthy as entire small nations.

      • Hettie 10 months ago

        You can spend a good deal of it on providing education, especially for girls, who otherwise would miss out, in developing countries, on housing the homeless, on providing employment with living wages, fair conditions and, in the USA, health insurance.
        Many things a billionaire can do to make the world a kinder place for the millions who struggle to service on $1.00 a day or less.

        • Joe 10 months ago

          Spot on young Hettie

  3. Robert Westinghouse 10 months ago

    I hope he gets it….

  4. Carl Raymond S 10 months ago

    Maybe with that money he can buy a better president.

    • hydrophilia 10 months ago

      I think he is excited about buying a better world.

      • Joe 10 months ago

        …that would be Planet Mars

    • Kapricorn4 9 months ago

      Elon would make quite a good US President in my view, but I doubt the job would appeal to him 🙂 Anyway he was born in South Africa, so I guess that rules him out.

  5. john 10 months ago

    I do not think Elon Musk wishes this kind of reward.
    If he does get it I would think he would devote the value to some new endeavor not for him as he does not appear to be a kind of person who desires weatth.
    Mind the goals set out seem to be very hard to reach.
    The figures mentioned seem to be mind blowing for growth.
    .

  6. Radbug 10 months ago

    I don’t know what’s so great about lithium stationary storage batteries. I prefer Harvard University’s ferrocene/viologen flow battery, plus, his car has awful quality control.

    • Gyrogordini 10 months ago

      Care to cite some documented poor QA examples? Tesla owners – all 100+k of them – seem to be the most happy consumers of the modern era, as cited by Consumer Reports and other publications.

      • neroden 10 months ago

        Tesla’s QA is excellent. Tesla’s service, however, is a mess, almost entirely due to wildly disorganized communications. (If the left hand knew what the right hand was doing, it would be fine.)

    • Alan S 10 months ago

      First I’ve heard of it. Which car has awful quality control and what examples of poor workmanship do you have?
      BTW, why do you prefer them and where can I buy a ferrocene/viologen flow battery? Does Harvard have a production facility we haven’t heard about?

    • My_Oath 10 months ago

      You know what’s so great about lithium stationary storage batteries? They exist.

      You know what’s wrong with ferrocene/viologen batteries? They don’t exist. They are what is known as ‘Blackboard Batteries’. They exist on a blackboard not in a shop where you can buy them.

      • Alan S 10 months ago

        But sound good if you want to impress people. The problem comes when you’re called to explain a nonsensical post.

  7. Alan S 10 months ago

    When I was young and naive I used to get worked up about the super rich becoming the mega rich. So what if Musk receives hundreds of billions? It doesn’t come out of the public purse and it’s what he does with it that matters. He could assist N Korea, ISIS or Trump in their ambitions or he could continue the tradition of philanthropy that exists in many countries. I think I know which he’ll choose.

    • itdoesntaddup 10 months ago

      Musk seems to derive much of his wealth from legal, above board subsidies. I guess you’re happy for the legislators to continue to provide for him from your bills and taxes.

      • john 10 months ago

        That statement is complete rubbish.

      • Alan S 10 months ago

        ‘Seems to’? How about some evidence.

        • itdoesntaddup 10 months ago

          You should read more widely: Estimate of $4.9bn from back in 2015:

          http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html

          You’ll find he’s been subsidised in many other countries too. e.g. NOrway, Germany, Denmark, UK, Hong Kong, India and even Australia.

          • Alan S 10 months ago

            Read more widely? I don’t think Googling ‘dirt on Elon Musk’ (or insert the name of anybody I don’t like) is a productive way to spend my time. BTW my 1.5 kW PV system was subsidised.

          • Gyrogordini 10 months ago

            My 7kW grid-connected system was not subsidized. I am delighted that it exports 90% of its generation back to the grid to help “the poor people without PV”. I get 20c, and it is then on-sold, so that those who wish can buy green energy at a reasonable price. Even with my new EV, there will still be surplus…

          • Ren Stimpy 10 months ago

            When Tesla soon completes their Gigafactory they will become one of the ‘most American’ car companies, in fact the most American company ever! with 95% of their materials and parts sourced from completely within the USA.

            This is the premise that The Donald and his Oddball Conservative cabinet and various other family members were elected upon, wasn’t it?

      • Joe 10 months ago

        I’ve read the the to and fro below. There is always an element of assistance ( subsidy, may or may not be the right description or ‘assistance’ ) in the start up phase of new industry. Musk can be you ‘whipping boy’ but what is your excuse for the FF Industry to still be receiving subsidies for the last 100 years of the ‘Age of Oil’ and the decades even more for ‘Coal’. Are you just anti Musk or are you genuinely anti all subsidies. If you are genuinely anti all subsidies then please contact PM Turnbull and tell him to turn off all the subsidy taps including FF.

    • wideEyedPupil 10 months ago

      Fast cars? Lol that’s what he did with his PayPal payout.

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