Tesla's Elon Musk qualifies for $11 billion options payout

Tesla's quarterly report on Monday hit targets qualifying Chief Executive Elon Musk for two options payouts worth a combined $11 billion.

The electric car maker beat Wall Street's expectations for first-quarter revenue and profit, boosted by record deliveries, robust demand from China, and environmental credit sales. 

It reported quarterly revenue of $10.39 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.84 billion, surpassing milestones that trigger the vesting of the fifth and sixth of 12 tranches of options granted to Musk in his 2018 pay package to buy discounted Tesla shares. 

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Musk, who is also a major shareholder and CEO of rocket maker SpaceX, receives no salary at Tesla. His pay package requires Tesla's market capitalization and financial growth to hit a series of rising targets.

Despite production that is a fraction of that of Toyota, Volkswagen, or General Motors, Tesla has become by far the world’s most valuable carmaker, with a market capitalization of $700 billion, compared with Toyota’s $250 billion.

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Tesla's shares have receded from record highs in 2021 after jumping more than eight-fold last year.

Each tranche gives Musk the option to buy 8.4 million Tesla shares at $70 each, a discount of more than 90% from their current price. At Monday's price of $722, the shares from four previous tranches, plus the fifth and sixth tranches, could generate a profit of nearly $34 billion, or almost $6 billion per tranche.

In its quarterly report after the bell, Tesla said it incurred an expense of $299 million related to Musk's pay package, "driven by an increase in market capitalization and a new operational milestone becoming probable."