Are These Tesla Motors Inc. Stock Option Grants Giving Away Too Much?

How generous is Elon Musk? Plenty. He recently granted hundreds of thousands of Tesla Motors (NASDAQ: TSLA  ) stock options to a handful of the car company's senior executives. Yet it's a surprisingly good deal for shareholders, as Fool contributor Tim Beyers says in the following video.

You wouldn't know it from the size of the grants. Chief Technical Officer J. B. Straubel received 220,000 options to buy shares at a strike price of $139.34 at various points over the next decade. VP of production Gregory Reichow took home 65,000 options at the same strike price. CFO Deepak Ahuja and VP of worldwide sales and service Jerome Guillen split 100,000 more in options awards.

But there's also a catch: Tesla grants performance stock options, exercisable only when certain conditions are satisfied. What conditions? The footnotes in the various Form 4 disclosures aren't that specific. Even so, investors should take the grants as a bullish sign, Tim says, because it shows that Musk is fostering a culture that rewards outperformance, rather than time served in the same job.

Now it's your turn to weigh in. Would you have been as generous with Tesla's stock options grants? Why or why not? Please watch the video to get Tim's full take, and then leave a comment to let us know whether you would buy, sell, or short Tesla stock at current prices.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 01, 2014, at 3:28 PM, Jim5437532 wrote:

    It's good have incentives and give rewards for better performance. But shouldn't everyone that performs better be rewarded, rather than concentrating on rewarding the rich?

    I don't think that the Tesla brass should be getting incentives. I think many company matters are not being handled right. I think Tesla batteries should have better protection so they are less likely to catch fire and explode. I suspect the adapter recall is not sufficient. I think it is too little, too late. I think they should have designed the UMC to be more robust and safer. I suspect to the recall as it sits, is just a Band-Aid. I think they should fix the underlying safety issues.

    I think they should invest more to reduce safety hazards in their products.

    It seems that they are working hard to cook the books and hype their products; putting safety on the back burner.

  • Report this Comment On February 01, 2014, at 6:40 PM, deeageaux wrote:

    Tesla is going the right way. Low pay for executives relative to the industry but high performance based options. Gross margin, production, market cap targets.

    Tesla is the safest car on the road without any fatalities or permanent injuries.

    Unlike gasoline tanks, Tesla battery packs have never exploded. And the risk of fire is lower than an ICE vehicle.

    There is nothing wrong with the original UMC adapters. Tesla upgraded the adapters to handle sub-par wiring or faulty wiring. So it is now safe to charge from an unsafe source.

    Just like the Germans, NHTSA will rule there are no underlying safety issues with the Model S. Risk are different and lower. The risk are not higher than a gasoline car.

    The suspension at a very low height has a higher probability of damage just like a Ferrari riding at a low height. But the driver will be able to chose ride height with the new software update. Lower equals better performance and better fuel efficiency at the cost of a small incremental chance of hitting road debris. Drivers choice.

  • Report this Comment On February 01, 2014, at 9:19 PM, Jim5437532 wrote:

    @ deeageaux

    The Tesla that crashed and burned in Mexico, is documented on video burning and exploding. At about 13 seconds into the video you can see where the Tesla explodes. The fire probably heated up adjacent battery cells to the point that some simultaneously "vented" explosively.

    http://youtu.be/RCn1CufaCYc

    Statistically the Tesla is more likely to catch fire and explode than similar EVs. It seems so far none of the Chevy Volts, Nissan Leafs, or Toyotas Rav4EV sold to customers have had their batteries catch fire after running over road debris or being in accidents. 2 Tesla S have caught fire after hitting road debris and 1 Tesla S caught fire and exploded after an accident.

    Lithium batteries are more likely to catch fire and explode when they are punctured, then gasoline tanks. If you shoot a lithium battery is likely going to burn and/or explode. If you shoot a gasoline tank it is unlikely to burn or explode.

    It was foolish for Tesla to locate a large lightly protected lithium battery and place it so close to the ground.

    German safety officials essentially gave it a road worthiness certificate. That doesn't mean there isn't anything wrong with the battery design/location or the US charging systems.

    Tesla and Tesla shills have tried to place the blame of the faulty Tesla charge connections on house wiring and wall plugs. While undoubtedly there has been and there will be bad house wiring and bad wall plugs; that should not be allowed to divert attention away from the faulty Tesla charger connections.

    Allegedly there has been about 900 returned and/or complaints about faulty adapters. Several people have been injured by Tesla charge connectors. For several months connectors are known to overheat, melted and burn but there wasn't a recall until the problems were reported to NHTSA.

    The real reason there has been a recall is the UMC connectors between the module and the adapter are poorly designed and prone to failure. The connectors are too light-duty to be reliable for the amount of current duration that often can pass through the connections. The thermal fuse will reduce the fire hazard, but it is only a Band-Aid, because there still is the underlying condition.

    Most of the charge connection failures that I have seen the source of heat was not the house wiring or wall outlet.

    http://www.teslamotorsclub.com/showthread.php/15304-Plug-Ada...

    http://www.teslamotorsclub.com/showthread.php/18092-Schmelte...

    http://www.teslamotorsclub.com/showthread.php/15304-Plug-Ada...

    A fire department ruled that the Tesla charge connections was a possible source in a Tesla garage fire.

    Excerpt from the fire investigation:

    "The most probable cause of this fire is a high resistance connection at the wall socket or the Universal Mobile Connector from the Tesla charging system"

    The Tesla adapters have a long history of failures. Tesla was at least on their second design revision of the adapters when the recall was issued. The first design and the revision has been documented overheating, melting and burning. Which leads me to wonder if the adapters that are being issued under the recall are a third or later revision of the adapter.

    Your post leads me to wonder if you a paid shill and or do you own Tesla stock or do you otherwise have a vested interest in Tesla. Not that I could believe your response.

  • Report this Comment On February 01, 2014, at 10:56 PM, spoonteam2 wrote:

    Tesla builds an interesting car, engineers are brilliant, concept is awesome. However with how the company is being run, how they treat people and the frequency of the breakdowns keeps me away from Tesla and its Stock. I worked there for a lot of years and I want no part of that dog and pony show. Sold my stock and I am not looking back

  • Report this Comment On February 03, 2014, at 4:26 AM, Jim5437532 wrote:

    Alleged Uncommanded Tesla Model S. Acceleration

    A complaint was filed with the NHTSA, allegedly a customer had uncommanded accelerations in cold conditions. Allegedly the vehicle was taken in for service in part for uncommanded acceleration, allegedly the uncommanded accelerations continued after the vehicle was serviced by authorized Tesla service.

    http://www-odi.nhtsa.dot.gov/owners/SearchResults?searchType...

  • Report this Comment On February 03, 2014, at 11:58 PM, jetamerica wrote:

    This article is very misleading. All of the named executives that work full time at TSLA have bailed out of 90+ % of their shares in the last 2 years. They have left $ millions on the table mostly selling for less than $100. They sold a total of 1.090,000 million shares at an average of 50% less than the current market price. That is Sales, Finance, Manufacturing and Technical. The only net buyer was Musk the part time CEO who acquired a million shares as his team were all selling

    When the CFO sells 65,000 shares at a high of $44.50 in April and only retained 2,975 it is a clear indication of his lack of confidence in TSLA. Blankenship sold 139,444 shares at $91 last May, 90% of his holdings. Why leave $80 per share, over $11 million on the table?

    Lack of confidence in a higher price is the only reason. If they were selling a small share of their holdings it might make sense. But selling almost all makes no economic sense.

    I do share their sentiment that this is a grossly over valued stock, worth less than $100 and am short a small position.

  • Report this Comment On February 04, 2014, at 7:13 PM, jeffhre wrote:

    jetamerica,

    Hopefully you don't have the same luck with your short as they had with timing their share sales.

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