NEW YORK (Bloomberg) -- Elon Musk is ahead of schedule to get a huge payday from Tesla Motors Inc. even though he earns less than $40,000 in annual salary.
In 2012, the electric carmaker awarded its billionaire founder 5.27 million options tied to milestones including developing new vehicles and ramping up production. While he was given until 2022 to meet the goals, he has already achieved 50 percent of them, according to a proxy statement issued April 15. That means he may get $1.6 billion well before 2022.
Under the 2012 stock plan, Musk earns 1/10th of the options every time Tesla hits a pair of goals -- one tied to its market value and another to the company’s operations. While he’s achieved seven targets tied to the growth of Tesla’s market capitalization, he’s only hit five of 10 operational ones.
That’s been good enough for him to receive half of the options so far. With a strike price of $31.17, those 2.64 million options would be worth $589 million if he had exercised them at Friday’s close. The total option award is intended to compensate Musk, who has never accepted his salary, for 10 years.
For Musk to receive the $1.6 billion, he needs to boost Tesla’s value another 28 percent, to $43.2 billion. He also has to maintain a 30 percent gross profit margin for four quarters, bring the car-maker’s aggregate production to 300,000 vehicles and bring the Model 3 to market.
“Many of the requisite milestones were viewed as very difficult to achieve” when they were granted in 2012, Tesla said in the filing last week.
Khobi Brooklyn, a Tesla spokeswoman, said the company considers the April 15 filing its official comment.
Musk has faced some hurdles recently. Last week, Tesla recalled 2,700 Model X SUVs to repair third row seats, after the SUV was late coming to market. Sales missed expectations because of parts shortages, the company said in an April 4 press release. In November, Tesla recalled 90,000 Model S sedans to check seat belts.
None of that has hurt the stock price. Tesla was up 22 percent in the 12 months through April 15. The shares closed at $253.88 today, down a quarter of a percentage point.