Tesla earnings qualify Elon Musk for an $11 billion payout

Tesla’s quarterly report on Monday hit targets qualifying Chief Executive Elon Musk for two options payouts worth a combined $11 billion.

The electric car maker beat Wall Street’s expectations for first-quarter revenue and profit, boosted by record deliveries, robust demand from China and environmental credit sales.

It reported quarterly revenue of $10.39 billion and adjusted earnings before interest, taxes, depreciation

and amortization (EBITDA) of $1.84 billion, surpassing milestones that trigger the vesting of the fifth and sixth of 12 tranches of options granted to Musk in his 2018 pay package to buy discounted Tesla shares.

Tesla on Monday posted its seventh-straight profitable quarter. The company made $438 million in the three-month period that ended March 31, as sales more than doubled the same period last year to nearly 185,000 vehicles. All but 2,000 of the sales were lower-priced Model 3

sedans and Model Y SUVs. Tesla said it didn’t produce any of its higher priced Model S sedans and Model X SUVs as it switched to new versions during the quarter.

The Palo Alto, California, company faces challenges as it tries to reach its second-straight annual profit this year. There’s a global shortage of semiconductors that’s forcing automakers to idle factories, and Tesla is facing renewed scrutiny

of its Autopilot partially automated driving system after two men died in a crash earlier this month near Houston.

Excluding stock-based compensation and non-recurring items, Tesla made 93 cents per share. That beat Wall Street estimates of 75 cents per share, according analysts polled by data provider FactSet. 

Once again the company needed regulatory credits purchased by other automakers in order to make a profit. Without $518 million in credits f or the quarter, Tesla would have lost money. Other automakers buy the credits when they can’t meet emissions and fuel economy

standards.

Musk, who is also a major shareholder and CEO of rocket maker SpaceX, receives no salary at Tesla. His pay package requires Tesla’s market capitalization and financial growth to hit a series of rising targets.

Despite production that is a fraction of that of Toyota, Volkswagen or General Motors, Tesla has become by far the world’s most valuable car maker, with a market capitalization of $700 billion, compared with Toyota’s $250 billion.

Tesla’s shares have receded from record highs in 2021 after jumping more than eight-fold last year.

Each tranche gives Musk the option to buy 8.4 million Tesla shares at $70 each, a discount of more than 90% from their current price. At Monday’s price of $722, the shares from four previous tranches, plus the fifth and sixth tranches, could generate a profit of nearly $34 billion, or almost $6 billion per tranche.

In its quarterly report after the bell, Tesla said it incurred an expense of $299 million related to Musk’s pay package, “driven by an increase in market capitalization and a new operational milestone becoming probable.”