Electric vehicle maker Tesla’s (TSLA) board has put forward a new package that could see its chief executive, Elon Musk, earn up to $1 trillion in total compensation if he hits certain ambitious milestones over the next 10 years.
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The payments will be in the form of incremental expansion of his Tesla shares, giving him more voting rights. This will mark the biggest corporate compensation in history.
Some of the key targets include Musk leading Tesla to progressively expand its market capitalization to $8.5 trillion from its worth of $1.09 trillion as of Friday. He would also have to oversee the automotive company selling millions of its cars, robotaxis, and AI-powered robots.
However, the package comes at a time when Tesla is facing intense competition from rivals such as BYD (BYDDF) (BYDDF) and is struggling to improve sales in Europe.
‘Incentivising Elon Is Fundamental to Tesla’
Other conditions in the package to unlock the full package include Tesla’s profit skyrocketing from about $17 billion—as of last year—to $400 billion over the next decade. Musk also has to stick with the company for at least seven and a half years to redeem any of the shares, or extend his stay to 10 years to get the full package.
“Retaining and incentivising Elon is fundamental to Tesla… becoming the most valuable company in history,” said Robyn Denholm, chair of Tesla’s board, in a letter to investors. However, the new plan is still subject to shareholders’ vote scheduled for November 6 at the company’s general meeting in Austin, Texas.
The new plan echoes a similar pay package (now worth about $96 billion) approved by the board in 2018, which was also conditional on hitting ambitious targets. Musk subsequently helped balloon Tesla’s value from $59 billion to over $650 billion, earning about $56 billion in stock options.
However, a Delaware judge shut down the 2018 package after years of court battle as shareholders resisted the move. The case progressed to the Supreme Court and is currently pending there.
If Musk manages to hit the 12 levels of mandated peak performances and he gets a favorable judgment in the Delaware case, his voting rights in Tesla could jump to 32%. Musk has, over the years, contested for more stakes in Tesla to augment his leadership of the electric car maker.
Activation of the full package could also see Musk become the world’s first trillionaire, after adding his current fortune of over 400 billion.
What Is The 12-Month Price Target for Tesla’s Stock?
Tesla’s shares are currently trading at nearly 2% higher in early trading on Friday, hitting $344.52 as of 7:58 a.m. EDT. However, TSLA stock currently has a Hold consensus recommendation on TipRanks, based on 14 Buy, 14 Hold, and eight Sell ratings by 36 Wall Street analysts.
Furthermore, analysts have offered 12-month price targets for Tesla over the past three months. The average TSLA price target currently stands at $309.00, which is an 8.72% downside risk from its closing price on Thursday.
