Tesla’s market capitalisation has broken through $100 billion to secure its place as the world’s second largest carmaker by value and put Elon Musk on course for a bumper payday.
Musk, co-founder and chief executive, will receive $346 million in share awards if he keeps Tesla’s value above $100 billion on average for the next six months. It is the first milestone in a lucrative pay deal that ultimately could lead to him picking up share awards worth as much as $55.8 billion.
Tesla’s shares have soared after it published a surprise third-quarter profit, delivered more cars than expected at the end of last year and benefited from analyst upgrades.
Musk, 48, has tied the success of the company to the Model 3, Tesla’s first mass-market car, and it is increasing production quickly after a series of setbacks.
Tesla shares hit an intraday high of $583.95 yesterday, well above the $554.80 needed to achieve a $100 billion market cap. They closed up 4.1 per cent, or $22.36, at $569.56, valuing the company at nearly $103 billion.
Only Toyota’s market capitalisation of about $201 billion exceeds that of Tesla. Volkswagen, the new No 3 by value, was valued at $99.5 billion yesterday and General Motors, the largest American carmaker by sales, was valued at $50 billion.
Musk needs to bring Tesla’s market capitalisation to $650 billion and to hit 12 of 16 financial targets set by the company to pick up his maximum award, which assumes no dilution of Tesla’s shares.
He will be awarded share options worth 1 per cent of the company each time that he increases Tesla’s market cap by $50 billion and hits an additional financial target, which involves increasing both revenue and underlying profit. He also must remain as chief executive or executive chairman throughout.
His deal, agreed in 2018, is the subject of shareholder legal action alleging breach of fiduciary duty by board members, among other things. Tesla said that the claims were without merit and that it would defend them vigorously.
When the compensation deal was announced, Musk said: “I actually see the potential for Tesla to become a trillion-dollar company within a ten-year period.” Tesla achieved the highest valuation for an American carmaker this month, eclipsing Ford’s 1999 record of $80.8 billion.