Please ensure Javascript is enabled for purposes of website accessibility

Elon Musk Collects Payout Valued at $775 Million from Tesla

By Howard Smith – May 29, 2020 at 8:16AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Tesla CEO meets milestones to earn his first tranche of performance pay, but not all shareholders approve.

Tesla (TSLA 0.99%) CEO Elon Musk has collected his first payment in a massive $56 billion incentive package put in place in 2018. This first tranche is worth almost $775 million based on Thursday's closing price for Tesla shares, the options strike price of the agreement, and the 1.7 million shares granted to Musk, according to an SEC filing. 

The company explains the performance package, saying the "CEO Performance Award is comprised of a 10-year maximum term stock option to purchase 20,264,042 shares of Tesla's common stock, divided equally among 12 separate tranches that are each equivalent to 1% of the issued and outstanding shares of Tesla's common stock at the time of grant, at an exercise price of $350.02 per share."

dollar sign landing on man's open hand, representing executive bonus pay

Image source: Getty Images.

This first tranche was triggered when Tesla met its first market capitalization milestone of $100 billion, along with certain operational revenue or profitability requirements. The market capitalizations requirements are met based on both a six month, and 30 day, trailing average of the Tesla stock price.

Upon exercising the options, Musk must also hold the stock for a minimum of five years, "with limited exceptions", and must remain as either "Chief Executive Officer or, alternatively, as our Chief Product Officer and Executive Chairman (with any other Chief Executive Officer reporting directly to him)" at the time the milestone is met.

One shareholder is challenging the incentive plan in a lawsuit, however. In Richard J. Tornetta v. Elon Musk, Tornetta alleges that Tesla's board violated its fiduciary duties by approving an excessive compensation plan for Musk, according to the Tesla's proxy statement.


Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$270.86 (0.99%) $2.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.