Coverage: Musk sets aggressive growth targets for Tesla

Billionaire Elon Musk set a series of aggressive growth targets at Tesla Inc.that would make the electric carmaker one of the world’s most valuable companies within the next decade and assured shareholders he’ll stick around by tying his compensation to those goals.

Tom Lavell and Dana Hull of Bloomberg News had the story:

The unprecedented pay package proposes Musk won’t get paid unless his company’s stock rises, further tying the 46-year-old chief executive officer’s personal wealth to that of shareholders. It envisions a staggering increase in market value to $650 billion that would put Tesla in the league of tech giants like Google parent Alphabet Inc. and Microsoft Corp., now more than 10 times its size. Revenue would expand to $175 billion, ahead of General Motors Co.

The move assures investors that Musk will lead Tesla through its next phase of rapid growth despite his many other commitments and interests. He is also the CEO of Space Exploration Technologies Corp. and has embarked on several other ventures including OpenAI, Neuralink and the Boring Co.

Under the plan, which requires shareholder approval in March, Musk’s pay is tied strictly to stock performance and profit. He will receive no salary or bonus. A 10-year grant of stock options vests in 12 tranches that are linked to market capitalization in $50 billion increments, starting at $100 billion. There are also milestones tied to revenue and adjusted earnings before interest, taxes, depreciation and amortization, Tesla said in a statement.

Subrat Patnaik and Alexandria Sage of Reuters reported that Tesla’s projected 10-year annual growth rate of 27 percent is aggressive:

That ambitious target implies Tesla stock will grow by 1,000 percent over a decade, or about 27 percent per year, a feat achieved by only a handful of major U.S. companies recently, including Amazon.com Inc, Priceline Group Inc and Domino’s Pizza Inc. Netflix has surged 6,600 percent in the past 10 years.

Tesla’s current market value of $60 billion is about the same as General Motors Co, but far below Apple Inc’s $921 billion.

The plan comes after Tesla’s much-anticipated Model 3 sedan missed several production targets and as many on Wall Street expect the company to launch another round of capital raising.

“We see Elon Musk’s ambitious long-term awards plan as an aspirational marketing tool to attract talent and capital ahead of an upward inflection in competition” for electric and autonomous vehicles, said Morgan Stanley analyst Adam Jonas, who has been bullish on Tesla shares.

Jen Wieczner of Fortune reported that the results could make Musk the world’s richest person:

Musk’s real reward would be even greater. After all, the CEO is also Tesla’s largest shareholder, and if he hits all 12 performance milestones, the company calculates Musk would own as much as 28.3% of Tesla. With that large a stake of a $650 billion company, Musk’s net worth would surge to $184 billion in Tesla stock alone—potentially making him the richest person in the world. (Although Musk’s stake is unlikely to end up that large due to dilutive events, such as stock issuance to employees, the size of his current Tesla holdings would be enough to make him the richest person alive today.)

The world’s wealthiest person is currently Amazon CEO Jeff Bezos, whose $108 billion worth of Amazon stock makes up the lion’s share of his net worth. Musk’s maximum stock option award would boost his net worth—even before factoring in his ownership in his other company SpaceX—above that of Bezos. (Of course, if Amazon stock rises at least 71% in the meantime, Bezos, who also foregoes a traditional salary, would likely maintain his title atop the world’s rich list.)

While money is a powerful incentive, it’s not clear how much the incremental awards have driven Musk’s performance at Tesla. Besides forfeiting a salary, Musk also has yet to exercise any of the stock options he has collected as part of his previous compensation agreement from 2012, despite having achieved nine out of 10 milestones required to to receive the maximum amount. Of the Tesla stock he currently owns (some 33.6 million shares), Musk acquired the vast majority of it before Tesla even went public in 2010.