Tesla Stock Price Soars 8%, Qualifies Elon Musk For $700 Million Payday

Elon Musk is on track to becoming the highest paid CEO in history despite his antics erasing $50 billion from the market value of Tesla Inc. on Friday with a silly comment Tesla's stock is overvalued.

"Tesla stock price is too high imo" tweeted Musk.

The immediate result of this unthinking rant was a 10.3% plunge in Tesla's stock to $701.32 at the close Friday. On the other hand, shares of Tesla had skyrocketed 85% this year as of April 30.

On Monday, however, Tesla's badly hit stock staged a remarkable recovery from Musk's misstatements, closing 8% higher and taking Tesla’s market capitalization to $141.1 billion at the close.

But, for Musk, the significance rests on the reality Tesla’s stock market value did reach a six-month average of $100.2 billion. This six-month average of $100 billion automatically triggered the vesting of the first of 12 tranches of options granted Musk as part of a multi-billion dollar pay package awarded him in 2018.

Musk had already met two other requirements: hitting a growth target and exceeding a one-month average $100 billion market cap.

Each tranche gives Musk the option to buy 1.69 million Tesla shares at $350.02 each. At Tesla’s closing stock price of $761.19 on Monday, Musk would theoretically be able to sell the shares for a profit of $694 million.

In September 2019, Tesla estimated Musk's 2018 compensation package was worth $2.6 billion when it received stockholder approval in March 2018. If Tesla's market value skyrocketed, these stock awards could be worth nearly $56 billion. The stock awards might be worth up to $70 billion if Tesla grew quickly.

The compensation award approved by the Tesla board in a Proxy Statement includes a no salary or cash bonus for Musk. Instead, the package sets rewards based on Tesla’s market value, which might jump as much as $650 billion over the next decade.

Musk’s award will exceed anything previously granted to U.S. CEOs. According to the package, Musk will receive the first portion of his reward if he manages to double Tesla's market cap to $100 billion within 10 years. The compensation plan involves stock options that vest in 12 tranches.

Tesla’s market value must increase to $100 billion for the first tranche to vest, which it already has. It must increase in additional $50 billion increments for the remainder.

The Proxy Statement filed with the U.S. Securities and Exchange Commission (SEC) said Musk "will receive no guaranteed compensation of any kind -- no salary, no cash bonuses, and no equity that vests by the passage of time. 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 our stockholders do extraordinarily well."

"By linking Elon’s compensation entirely to Tesla’s performance so that he does not receive any compensation unless all our stockholders benefit from significant value creation, the new performance award will similarly ensure that Elon and the team are totally aligned with stockholder interests going forward."