PALO ALTO, Calif.— Elon Musk will remain at Tesla Inc. under a 10-year, all-or-nothing pay package that demands massive growth.
The agreement, revealed Tuesday in a regulatory filing, requires that Tesla grow in $50 billion leaps, to a staggering $650 billion market capitalization.
To put those demands in perspective, the electric car maker, based in Palo Alto, California, is worth less than $60 billion today. Tesla must hit a series of escalating revenue and adjusted profit targets, only after which Musk would vest stock options worth 1 percent of company shares. He would get no other guaranteed compensation including salary, bonuses or equity "that vests simply by the passage of time," Tesla said.
The pay still needs the approval of Tesla shareholders, who will vote on it at a special meeting in late March. Elon and Kimbal Musk, Elon's brother, will recuse themselves from the vote.
If the goals are reached, Tesla would be one of the biggest companies in America, and Musk's wealth would grow exponentially. The $650 billion benchmark would make Tesla the fourth-most valuable U.S. company, behind only Apple Inc., Alphabet Inc., and Amazon.com Inc. based on current valuations. It would be larger than Microsoft Corp., and would exceed the current combined valuation of the world's top eight publicly-traded auto companies.
Tesla's plan to meet those goals was laid out in 2016 in a document Musk called "Master Plan, Part Deux." Tesla will expand from electric cars and SUVs to trucks — including a semi tractor-trailer that's due out in 2019 — and buses. It will continue to work on autonomous vehicle technology and plans to enter the car-sharing business, letting owners share their cars when they're not using them and running Tesla-owned fleets in cities. The company, which bought solar panel maker SolarCity Corp. in 2016, also plans to expand its solar panel and energy storage businesses.
In order to vest shares when milestones are reached, Musk must stay on as CEO or serve as both executive chairman and chief product officer. That would give Tesla the option of hiring a different CEO in the future. Tesla said while it doesn't currently intend for Musk to step away from the CEO role, the terms allow Musk to potentially focus more of his attention on key product and strategic matters.
Musk is also the founder and CEO of rocket maker SpaceX and the co-founder and chairman of OpenAI, a nonprofit that researches artificial intelligence. He was also the founder of the online payment service PayPal.
Musk has worked under similar all-or-nothing conditions before. Under a 2012 agreement, Musk's stock options vested only if the Tesla's market cap continued to rise in $4 billion increments. The company also had to hit matching operational milestones, including vehicle production targets and developmental milestones tied to the Model X and Model 3 programs. Tesla wound up reaching all of the market cap milestones and nine of the 10 operational milestones.
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When that pay package was created, the company was worth just $3.2 billion. Its market cap at the end of last year was 17 times that amount.
Tesla — which turns 15 this year — has never earned a full-year profit. It has reported only two profitable quarters since it went public in 2010.
Each of the four vehicles it has made has faced significant delays and production problems. Its newest vehicle, the lower-cost Model 3 sedan, is no exception. Musk said last summer that Tesla would be making 20,000 Model 3s per month by the end of last year, but Tesla made just 2,425 Model 3s in the fourth quarter. Musk now says Tesla will make 20,000 Model 3s per month at the end of the second quarter.
But that hasn't dimmed investors' appetite for Tesla's stock. Tesla shares were up 1 percent to $355 in morning trading. They've risen 39 percent over the last year.