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  • Tesla's stock rally has put CEO Elon Musk closer than ever to the first payout of his compensation package, awarded in January 2018.
  • If Tesla meets and sustains a $100 billion market capitalisation, Musk would unlock 1.69 million options worth roughly $346 million – around R5 billion.
  • Here's what needs to happen before Musk unlocks the options.
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Tesla is off to a great start in 2020. So far, the stock's 25% surge has pushed its market capitalisation to new highs, making it the highest-valued US automaker of all time, and worth more than Ford and GM combined.

The climbing stock price has also brought Tesla's CEO Elon Musk closer than ever to completing a section of his mega-compensation package, which would unlock 1.69 million stock options worth roughly $346 million – around R5 billion. Tesla has already completed an operational target necessary for Musk's options to vest.

Here's what else Tesla needs to achieve for Musk to complete the first market capitalisation tranche:

  • The first tranche milestone is a market capitalisation of $100 billion. At Monday's close, Tesla's market value was roughly $95 billion. A 6% surge would put it above $100 billion in market value and start the clock.
  • Sustained market capitalisation is required for each Market Capitalisation Milestone to be met, other than in a change-in-control situation. Specifically, there are two prongs that must be met to achieve a given Market Capitalisation Milestone:
    • Six calendar-month trailing average (based on trading days).
    • Thirty-day calendar-day trailing average (based on trading days).

The vesting schedule and milestones are part of Elon Musk's Tesla compensation package, widely believed to be the largest deal of its kind according to Bloomberg.

The award, which was granted to Musk on January 21, 2018, was $2.6 billion in total, or around R38 billion. It has a number of vesting tranches related to market capitalisation and operational milestones that Tesla must reach for Musk to unlock up to 20.2 million stock options. Musk is not guaranteed a salary or any cash bonuses along the way.

When the package was awarded, Musk had the potential to gain as much as $55.8 billion, the equivalent of around R800 billion if no new shares were issued. Since then, the company has awarded stock to employees and sold $2.7 billion in shares and convertible bonds.

Tesla has gained roughly 25% year-to-date through Monday's close.

See also: Boeing's new CEO will get a R101 million payout if he successfully gets the troubled 737 Max flying again

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