I think Mr Musk is feeling smug about the year ahead. As he should. Fish are crowding the barrel to be shot at will.
Just one thing, Musk's options have tended to vest when milestones are considered probable. This was true of the Model X production ages before production actually started and would be true of the Model 3 Alpha and Beta prototypes more recently.
Actually, now that I look over this, I am confused yet again. So I am going to break this out by all of them, so hopefully it will make sense to me... here goes (These are in the order they show up on the website, however the dates pulled are the "Date of Earliest Transaction, hence dates get a little mixed up)
1/27/2016 - Option purchase @6.63 of 532,000 shares (original option date looks to be listed at 12/4/2009??? Huh? The CEO Grant was 2012... not 2009? Ok, this is the start of my confusion... see below as I do come to an answer in the end)
8/19/2015 - Stock purchase @242 of 82,645 shares (I believe this was part of the last stock offering that was recently done)
13/9/2013 - Stock purchase @0 of 75 shares (This was also odd, because they were a direct buy, as opposed to indirect through his Elon Musk Trust Fund - either way they are listed as vesting 100% on December 5, 2014)
11/7/2013 - Stock purchase @0 of 1,256 shares (Note on this was: Shares were received... part of the pro-rata distribution by VEP I effected on Nov 7, 2013 - Unsure what VEP I is, maybe someone else knows?)
6/10/2013 - Option Grant @100.05 of 350 shares (There is nothing attached to this, other than an expiration date of 6/10/2023, unsure what this was for)
5/30/2013 - Stock purchase @92.24 of 1,084,129 shares (This was the 2013 stock offering that he took out a loan to buy)
4/8/2013 - Option Grant @41.83 of 350 shares (Also nothing attached to this one, but that is the second one that has a 10 year period tied to it for no reason???)
10/3/2012 - Stock purchase @28.25 of 35,398 shares
8/13/2012 - Option Grant @31.17 of 5,274,901 (This is the CEO Stock Option Grant being talked about. You can see here it expires on 8/13/2022 - It has a note on the "Date Exercisable" that it is only exercisable based on operational and market cap milestones - Also Spell check doesn't like the word "Exercisable"... They need to stop making up words apparently)
3/20/2012 - Stock purchase @0 of 36,274 (This was part of a pro-rata distribution effect by Valor Equity Partners, LP)
2/18/2011 - Stock purchase @28.76 of 1,416,000 (I believe this was the 2011 funding raise they did? I don't recall)
2/18/2011 - Stock purchase @0 of 15,969 (Shares acquired upon distribution from Valor Equity Partners, LP)
6/25/2010 - Option Grant @6.63 of 3,355,986 (I'll come back to this one below, I believe this is related to the next entry as well... which I will talk about both in more detail)
12/4/2009 - Option Grant @6.63 of 838,996 (again, I'll talk about this more down below)
7/2/2010 - This was the conversion of shares when the company went public.
Ok... So, it looks like in 2009 they gave him some performance objectives to meet and it would ensure that he got, what appears to be a total of 3,355,986 shares assuming all milestones are met. It looks like they granted him some of those milestones. The direct line from the relevant Form 4 is as follows:
On December 4, 2009, the reporting person was granted an option to purchase 3,355,986 shares of common stock as reported on a Form 3 filed by the reporting person on June 25, 2010. The option vests in four equal installments based on the Issuer's satisfaction of certain performance objectives set forth in the option agreement. On January 21, 2011, the Board of Directors certified that the first performance objective has been met, resulting in vesting of the option as to 838,996 shares.
So that explains the 838,996 option contract as well as the recent one of 532,000. The dates and more importantly the share prices match up. Also note that the $6.63 price was *before* the company went public, in case anyone was confused about that. This helps with identifying other such investments that are based on pre-IPO option grants. You will notice that there are a bunch of recent filings that line up to similar pricings to other executives.
So this performance milestone was outlined in the 2010 annual report and reads as follows:
Included in our December 4, 2009 stock option grants were 6,711,972 stock options granted to our Chief Executive Officer in two separate grants. In recognition of his and our company’s achievements and to create incentives for future success, our Board of Directors approved an option grant to our Chief Executive Officer representing 4% of our fully-diluted share base prior to such grant as of December 4, 2009, or 3,355,986 stock options, with 1/4th of the shares vesting immediately, and 1/36th of the remaining shares scheduled to vest each month over three years, assuming continued employment through each vesting date. In addition, to create incentives for the attainment of clear performance objectives around a key element of our current business plan—the successful launch and commercialization of the Model S—the Board of Directors approved an additional option grant to our Chief Executive Officer totaling an additional 4% of our fully-diluted shares prior to such grant as of December 4, 2009, or 3,355,986 stock options, with a vesting schedule based entirely on the attainment of performance objectives as follows, assuming Mr. Musk’s continued employment and service to us through each vesting date:
- 1/4th of the shares subject to the option are scheduled to vest upon the successful completion of the Model S Engineering Prototype;
- 1/4th of the shares subject to the option are scheduled to vest upon the successful completion of the Model S Validation Prototype;
- 1/4th of the shares subject to the option are scheduled to vest upon the completion of the first Model S Production Vehicle; and
- 1/4th of the shares subject to the option are scheduled to vest upon the completion of the 10,000th Model S Production Vehicle.
If he does not meet one or more of the above milestones prior to the fourth anniversary of the date of the grant, he will forfeit his right to the unvested portion of the grant.
Due to the significant number of stock options granted to our Chief Executive Officer, we valued these December 2009 grants by using the following grant-specific Black-Scholes assumptions: risk-free interest rate of 1.7%, expected term of 4.1 years, expected volatility of 70% and dividend yield of 0%. Stock-based compensation expense related to Mr. Musk’s grants was $4.7 million and $7.2 million for the three and six months ended June 30, 2010.
Included in our June 12, 2010 stock option grants were 666,300 stock options granted to various members of our senior management with a vesting schedule based entirely on the attainment of the same performance objectives as those outlined for Mr. Musk above.
What I am assuming is that he was forced to convert the shares to stock finally since the options expired in December of this year. What I am still scratching my head over is the disparity of the amount purchased verses the amount that should have been granted... Especially since they were given 4 years to meet these goals (December 4, 2013) and they easily beat them (as by the end of 2013 they had delivered over 20,000 vehicles). In either case, we have not seen Elon actually exercise any of the options granted or pending that are from the 2012 CEO grant. These shares purchased recently were based on something that was granted 7 years ago, and met over 3 years ago.
As I am afraid this actually has no real short term impact a mod can feel free to move all of this to another thread if they like. But at least I think I cleared this whole thing up.
