Tesla’s (TSLA) strong recovery places Elon Musk in line for first big payday

After Tesla shares (NASDAQ: TSLA) jumped by more than 8% on Monday, the company’s market capitalization stood at $141.1 billion at the closing bell. This rise brought the electric automaker’s market cap to a six-month average of $100.2 billion, qualifying CEO Elon Musk for his first payday according to his 2018 pay package.

The rise in market cap comes days after Musk offered his two cents on TSLA, where he controversially said that the company’s stock price was too high in his opinion. After Musk’s tweets, the stock did drop. However, it has rebounded nicely and is currently up about 1.51% at the time of writing.

After its rally on Monday, the six-month average of TSLA’s market value surged past the $100 billion mark, according to data from Refinitiv. This figure triggers the first bonus option that grants Musk the opportunity to buy Tesla stock as a part of a 2018 compensation plan. It is the first of 12 tranches in the pay package, which had several requirements, one of which is a one-month average with a $100 billion market cap.

According to Reuters, each of the twelve tranches gives Musk the option to buy 1.69 million shares of the electric vehicle’s stock at $350.02 per share. If Musk were to sell the shares at Monday’s closing bell price of $761.19 per share, he would make a profit of $694 million.

Tesla’s rally in the stock market appears to be justified, as the company posted its third straight quarter with a profit last Wednesday, April 29. Despite Tesla’s main production facility in Fremont, California, being shut down for over a month, the automaker managed to maintain substantial growth, posting a positive earnings report.

The company’s success in Q1 came from its ability to adapt to store and factory closures by implementing contactless delivery measures so owners could still take delivery of their vehicles. Tesla also launched deliveries of the Model Y in mid-March, a crossover that executives believe will be the company’s most successful EV to date.

Musk’s pay with Tesla has always been incentivized, and he has only accepted California’s minimum wage requirements as his regular pay. These sit in a bank account that he has never touched. “It just ends up accumulating in a Tesla bank account somewhere,” he previously said.

In 2018, Tesla unveiled Musk’s pay package, which outlines a possible $55.8 billion in pay if no new shares were issued. However, Tesla did rollout shares to compensate some of its employees, and in 2019 the company sold $2.7 billion in stocks and convertible bonds.

The final tranches of Musk’s payment plan could vest over $50 billion increments of the company’s market cap over the agreement’s 10-year span. Musk would qualify to earn the full pay package if Tesla’s market cap reaches $650 billion, and the automaker reaches revenue and profit targets.

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