What Elon Musk Must Do To Unlock $1 Trillion Tesla Pay Package

Tesla shareholders have approved a pay package that could propel CEO Elon Musk, already the richest person on the planet, to become the world's first trillionaire. The proposal was approved with over 75 per cent support.

Musk does not draw a traditional salary. Instead, the approved package comes as a stock grant that could award him up to 423.7 million additional Tesla shares over the next decade, CNN reported.

The plan does not automatically make Musk a trillionaire. The stock grant will be distributed in 12 tranches, contingent upon Tesla achieving specific operational milestones and growing its market valuation in $500 billion increments, according to The Washington Post.

To earn the full package, Musk must help lift Tesla's market value to $8.5 trillion, a leap that requires shares to surge roughly 466 per cent from current levels, CNN stated. 

For each $500 billion increase in Tesla's valuation, Musk unlocks an additional 1 per cent of the company's shares, growing his stake that already exceeds 15 per cent and is worth over $200 billion. The Tesla board retains some discretion over the awarding of these tranches, The Washington Post reported.

The first tranche of stock is set to be released if Tesla reaches a market capitalisation of $2 trillion. The company's current market cap is $1.54 trillion, CNBC reported. 

Subsequent tranches would be triggered by $500 billion increments, up to $6.5 trillion, while the final two would require $1 trillion increments, with the total market value reaching $8.5 trillion. These awards are paired with operational goals to ensure performance aligns with valuation gains.

Financial targets are equally ambitious. Tesla must achieve a trailing 12-month adjusted EBITDA of $50 billion to unlock the first tranche of shares and sustain $400 billion per year to claim the full award, according to a Wall Street Journal report. Last year, Tesla posted an adjusted EBITDA of $16 billion, down from a 2022 peak of $19 billion.

Other milestones include delivering 20 million vehicles, reaching 10 million active Full Self-Driving (FSD) subscriptions, producing one million Optimus humanoid robots and deploying one million robotaxis commercially. Tesla has delivered over eight million vehicles so far, according to its September proxy statement.

The plan does not clarify whether the FSD subscriptions must be bought or could include free trials. Currently, Tesla offers partially automated “FSD Supervised” systems in the US and plans to advance these systems to operate without human oversight.

Each stage sets out a path for Tesla to achieve a massive market capitalisation. If Musk achieves all the targets, he becomes eligible for roughly 12 per cent in Tesla stock, valued at about $1 trillion. 

The net value of the shares is calculated at $878 billion, as the plan excludes the stock value at the time the board approved it in early September, Reuters reported.

To be eligible, he must remain with the company for at least seven and a half years and help develop a long-term succession plan for Tesla, according to The Guardian.