Elon Musk could pocket another $3 billion if Tesla hits earnings goals

• Tesla CEO Elon Musk could pocket another $3 billion in compensation if the electric-vehicle company hits specific revenue or profit goals in its third-quarter earnings report later this month.
• That would be Musk’s fourth of 12 tranches of awarded Tesla options, part of his 2018 incentive pay package.
• The pay package is based on two criteria: operational goals and market-capitalization milestones.
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The meteoric and sustained rise of Tesla means its CEO, Elon Musk, could receive his fourth of 12 options tranches from his 2018 compensation package.

The compensation awards are based on two criteria: Tesla’s operational goals, related to revenue and profits, and its market capitalization.

The first criterion for the fourth tranche, a six-month average market capitalization of $250 billion, has been achieved, according to data from YCharts.com.

Tesla’s market value was $391 billion on Tuesday. The company breached the $250 billion threshold in July.

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Musk's compensation package is made up of a series of Tesla options awards, allowing him to buy a fixed number of Tesla shares at a discount to the stock price.

Each tranche qualifies Musk to purchase 8.44 million shares at $70 per share. Based on Tuesday's closing price, the fourth tranche of Musk's pay package would be worth about $3.5 billion and cost him only $591 million. If Musk immediately sold those shares, he would pocket $3 billion in profit.

Whether he gets the fourth tranche is based on Tesla's earnings report later this month. The company would have to hit a trailing 12-month adjusted EBITDA of $4.5 billion to unlock Musk's award.

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In the trailing 12 months through June, Tesla hit $4.42 billion in adjusted EBITDA, just shy of the target.

But a bearish JPMorgan note published on Monday said analysts expected Tesla to record third-quarter adjusted EBITDA of $1.183 billion, which would raise its trailing 12-month adjusted EBITDA to just above $4.5 billion.

Tesla is still $10 billion short of hitting Musk's trailing 12-month revenue target of $35 billion, which would unlock an additional payment tranche.

Here's a breakdown of Musk's compensation incentive package and all 12 tranche requirements.

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