Elon Musk is set to receive the 4th tranche of his Tesla compensation package worth $3.5 billion
- Tesla CEO Elon Musk is set to receive the fourth tranche of his 12-tranche compensation package that was put in place in 2018.
- The electric-vehicle maker surpassed $4.5 billion in trailing 12-month Ebitda with last week's third quarter earnings report.
- Musk stands to receive 8.44 million Tesla shares at $70 per share, worth a total of $3.55 billion as of Friday's close.
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Compensation secured.
That's what Tesla CEO Elon Musk may have been thinking after the electric vehicle manufacturer reported its third quarter earnings last week.
Tesla registered $1.8 billion in Ebitda in the third quarter, bringing its trailing 12-month Ebitda reading to well above the $4.5 billion threshold needed for Musk to receive the fourth tranche of his 2018 incentive pay package, according to a 10-Q filed with the Securities and Exchange Commission Monday.
The company registered a total of more than $5 billion in Ebitda over the past four quarters.
The compensation awards are based on two criteria: Tesla's operational goals related to revenue and profits, and its market capitalization.
The first criterion for the fourth tranche, a six-month average market capitalization of $250 billion, has been achieved, according to data from YCharts.com.
Tesla sported a $393 billion market capitalization as of Friday's close. The company breached the $250 billion threshold for the first time ever in July.
Musk's compensation package is made up of a series of Tesla options awards, allowing him to buy a fixed number of Tesla shares at a discount to the current stock price.
Each tranche qualifies Musk to purchase 8.44 million shares at $70 per share. Based on Friday's closing price of $420.63, the fourth tranche of Musk's pay package would be worth about $3.55 billion and cost him only $591 million. If Musk immediately sold those shares, he would pocket $3 billion in profit.
But Musk can't sell any shares awarded to him for at least five years, given the lock-up period associated with the compensation pay package.
Tesla is still $7 billion short of hitting Musk's trailing 12-month revenue target of $35 billion, which would unlock an additional payment tranche. The company recorded $28 billion in revenue over the trailing 12 months.
In Tesla'a 10-Q filed, the company said it was "probable" that Musk would achieve the $35 billion in revenue and $6.0 billion in Ebitda compensation targets, setting him up for even more gains in the quarters ahead.
Here's a breakdown of Musk's compensation incentive package and all 12 tranche requirements.