Elon Musk could become the world’s first trillionaire if he hits aggressive targets for Tesla in the next 10 years. The electric car company said in a regulatory filing on Friday that it will hand Mr Musk shares worth as much as 12% of the company in a dozen separate packages if the company meets certain targets, including huge increases in its car production, share price and operating profit.
If approved by shareholders, the new pay package could make Mr Musk the world’s first trillion dollar executive (£740.5billion). It would also mark a new level of outsized pay in the United States. But the payoff is in shares not cash and the targets are extreme.
Mr Musk overcame doubters to turn Tesla into the world’s most valuable car company, but he could face steeper odds hitting the targets set by the company’s compensation committee.
This is not least because Tesla’s main business of making electric vehicles is currently in a slump, in part because of Mr Musk’s foray into politics. Tesla stock is down 25% this year.
To get his first package of shares equivalent to 1% of the company, Mr Musk would have to convince investors in the stock market that Tesla is worth $2trillion (£1.48tn) in total, double its value today.
He would also have to hit several other milestones. To receive all the shares offered and make him the world’s first trillion-dollar man would require Tesla’s market value to then rise to $8.5tn (£6.3tn), double that of the world’s most valuable company now, chipmaker Nvidia.
Among other goals, sales of all Tesla vehicles would eventually also have to reach 20 million, nearly triple its entire sales since it was founded more than two decades ago.
Mr Musk would also have to vastly expand Tesla’s robot and robotaxi businesses by selling a million of the bots and a million of the driverless cabs. The latter is a business which has only begun to roll out its taxi service and is behind rivals such as Waymo.
The offer also includes Musk staying with Tesla for at least seven and a half years to cash out on any stock and 10 years to earn the full amount. He would also receive more voting power over Tesla under the proposed plan.
The EV company is set to hold its annual shareholders meeting on November 6, where investors will vote on the new pay package.
Tesla’s last shareholders meeting was on June 13 last year, when investors restored Mr Musk’s record $44.9bn (£38.95bn) pay package which had been thrown out by a Delaware judge. Late last year the court revoked the package for a second time. Tesla has appealed the ruling.
A condition of the 11th and 12th tranches of the pay plan includes Mr Musk coming up with a framework for someone to succeed him as CEO.
The plunge in Tesla sales this year was largely due to a backlash over Mr Musk’s ties to US President Donald Trump.
Tesla also faces intense competition from big Detroit carmakers and from China. Its sales fell precipitously in Europe after Mr Musk aligned himself with a far-right political party in Germany.
Sales plunged 40% in July in the 27 European Union countries compared with the year earlier even as sales overall of electric vehicle soared, according to the European Automobile Manufacturers’ Association.
Meanwhile, sales of Chinese rival BYD continued to climb fast, grabbing 1.1% market share of all car sales in the month versus Tesla’s 0.7%.
In its most recent quarter, Tesla reported quarterly profits plunged from $1.39bn (£1.03bn) to $409m (£302.7m). Revenue also fell and the company came up short of even the lowered expectations on Wall Street.
Investors have grown increasingly worried about the trajectory of the company after Mr Musk spent so much time in Washington this year, becoming one of the most prominent officials in the Trump administration in its bid to cut the size of the US government. He has since quit his advisory role.
Last month Tesla said that it gave Mr Musk a stock grant of $29bn (£21.5bn) as a reward for years of “transformative and unprecedented” growth despite the drop in sales and profits.
Tesla said at the time that the grant was a “first step, good faith” way of retaining Mr Musk and keeping him focused, citing his leadership of SpaceX, xAI and other companies.
Mr Musk said recently that he needed more shares and control so he couldn’t be ousted by shareholder activists.