Elon Musk’s New Tesla Pay Package Won’t Make Him a Trillionaire Right Away

This article does not provide investment advice. The author does not hold any stakes in the stocks referenced herein.

Elon Musk’s Ambitious Path to Trillionaire Status

Elon Musk is now on a potentially groundbreaking journey to become the world’s first trillionaire within the next decade, largely owing to a recent proposal concerning his compensation package at Tesla. However, this ambitious objective comes with enormous challenges.

The compensation proposal, which awaits approval from Tesla’s shareholders, outlines a structure through which Musk could acquire shares valued at approximately $1 trillion. This is contingent upon his ability to add $7.5 trillion in shareholder value by hitting a series of rigorous performance benchmarks tied to both market capitalization and operational efficiency.

Operational milestones including 20 Million Tesla Vehicles Delivered and $400 Billion of Adjusted EBITDA.

Table detailing performance milestones, market capitalization targets up to $8.5 trillion, and operational goals.

Underpinning this proposal, specific market cap thresholds will be assessed using a method that averages stock prices over both 30 days and 6 months. This ensures that the achievement of market milestones reflects a sustained growth trend rather than temporary fluctuations.

In addition to market capitalization targets, Musk must simultaneously reach either sales or earnings milestones to unlock further stock options. Notably, these earnings targets will progressively escalate in difficulty, pushing for higher performance metrics.

Musk’s responsibilities will include delivering a cumulative total of 20 million electric vehicles (compared to the roughly 7 million sold to date), expanding full self-driving (FSD) subscriptions to 10 million, developing a backend for a robotaxi fleet of 1 million units, and producing 1 million units of the Optimus humanoid robot, of which currently none exist.

As of late 2024, Tesla reported an annual EBITDA of $12.444 billion. To meet this new proposal, Musk would need to ramp this figure up dramatically to a staggering $400 billion, along with stringent parameters:

“For purposes of clarity, meeting each of the last three Adjusted EBITDA Milestones requires achieving Adjusted EBITDA of $400, 000, 000, 000 over four consecutive fiscal quarters. As such, Mr. Musk achieves all of the Operational Milestones prior to a change in control only if Tesla earns $400, 000, 000, 000 of Adjusted EBITDA over three non-overlapping periods, each made up of four consecutive quarters.”

At the conclusion of the ten-year period outlined in the proposal, Musk will be expected to engage with the Tesla board to establish a plan for “long-term CEO succession.”

It’s also pertinent to mention that Musk was recently granted a $29 billion interim compensation plan, which includes 96 million restricted shares with an exercise price of $23.34 per share.

For context, a Delaware court ruling in January 2024 invalidated Musk’s $56 billion compensation package from 2018 due to a flawed approval process and Musk’s excessive influence over Tesla’s board. This ruling also rendered his unexercised stock options of 304 million shares void, options that could have given him approximately 9 percent of Tesla’s then outstanding shares, although he currently retains a 13 percent stake in the company.

In June 2024, a significant 77 percent of Tesla shareholders agreed to revise the 2018 compensation package in light of Musk’s leadership role during the company’s ventures into artificial intelligence and robotics. Following the Delaware court ruling, Musk had sought increased voting control of 25 percent to safeguard against any potential challenges to his leadership.

While relocating its corporate headquarters to Texas, Tesla maintained legal jurisdiction in Delaware regarding Musk’s compensation, which involves Chief Judge Kathaleen St. J.McCormick’s court.

However, in December 2024, the judge upheld her earlier decision, emphasizing that the shareholder vote did not remedy the procedural shortcomings identified in the original ruling.

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