Tesla's quarterly report could land Musk another R50-billion - TechCentral

Tesla’s quarterly report could land Musk another R50-billion

Tesla CEO Elon Musk. Hannibal Hanschke/Reuters

Tesla’s upcoming quarterly report could put another US$3-billion in CEO Elon Musk’s pocket. That’s R50-billion at the time of writing.

The electric car maker on Tuesday saw the six-month average of its stock market value hit $250-billion, a milestone toward triggering the fourth of 12 tranches of options to buy Tesla stock at a discount, granted to the billionaire in his 2018 pay package.

Musk’s compensation is exclusively made up of a series of potential stock options rewards based on market capitalisation and operational goals. To secure Musk’s fourth tranche, Tesla still must hit a goal related to revenue or profitability, and that could happen in the company’s third quarter report, the date of which has yet to be announced.

Tesla’s stock was down 0.8% at midday on Tuesday, but the company’s six-month average market capitalisation rose, thanks to a strong rally in recent months. Each tranche gives Musk the option to buy 8.44 million Tesla shares at $70 each, about a sixth of their current price.

At Tesla’s current stock price of $420, Musk would theoretically be able to sell the shares related to the upcoming tranche, plus three other tranches that vested in recent months, for a combined profit of $11.8-billion, or almost $3-billion per tranche.

Musk’s first tranche was worth about $700-million in May, when it vested, but its value has increased along with Tesla’s stock price.

Controversial

The Silicon Valley billionaire’s pay package, which surpasses anything previously granted to top US executives, was controversial when it was approved by shareholders. The median compensation for Tesla employees last year was about $58 000, according to a company filing.

Tesla’s stock has surged 400% in 2020 as the company increased sales of its Model 3 sedan, giving it stock market value of almost $400-billion. After Tesla last week said it delivered a record 139 300 vehicles in the third quarter, investors are now awaiting the company’s quarterly financial report.

While investors focus on gross margins, free cash flow and earnings per share in that report, adjusted earnings before interest, tax, depreciation and amortisation, or Ebitda, will be key to Musk’s personal finances. This is an operating metric that Tesla further customises by excluding the cost of stock-based compensation, including Musk’s.

In the four quarters through to June, Tesla’s adjusted Ebitda reached $4.42-billion, just short of a $4.5-billion milestone that would open the way for Musk’s next options tranche.

JPMorgan estimated in a recent client note that Tesla will report adjusted Ebitda of $1.183-billion for the September quarter, which would raise Tesla’s rolling four quarters of adjusted EBITDA to $4.52-billion. That, along with Tuesday’s increase in the company’s six-month average market capitalisation, would qualify Musk for his next options payout.  — Reported by Noel Randewich, (c) 2020 Reuters

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