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Tesla, Elon Musk, and meeting internal Performance Goals

Discussion in 'TSLA Investor Discussions' started by stealthology, Dec 16, 2015.

  1. stealthology

    stealthology Member

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    Hi all,

    I seem to vaguely remember someone pointing out that Tesla has set up some performance goals internally, and if they achieve these goals, they (management) would be rewarded. I remember one of them being "have an $XXB market cap by XXXX", "deliver Model X by the end of September", etc.

    Does someone know what these goals are, and where to find them?

    Thanks,
    Dan Gessler
     
  2. esk8mw

    esk8mw Active Member

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    If these goals are tied to compensation, they would have to be reported in the 2015 proxy statement. I'd start there.
     
  3. techmaven

    techmaven Active Member

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    If you look at the SEC filings, each Form 10-Q filing as a section called, "Note 9 - Equity Incentive Plans" and you can find what you are looking for in there.

    Here is the relevant portion of the latest 10-Q:

     
  4. Discoducky

    Discoducky Active Member

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    Not sure many shareholders would agree with this one as the intent is that 'production ramp' should immediately succeed...

    Founder cars do not seem to fit the bill...

    Yes, as stated, TM made a Model X that they sold (aka "Production"), but the intent is that they could make more each following production week on the production manufacturing line with PPAP'd (Production Part Approval Process) parts. The later does not appear to be happening yet unless I've missed a signature delivery.
     
  5. techmaven

    techmaven Active Member

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    Technically, if they built the Founder's versions with the PPAP'd parts and then dropped their 3rd party supplier and moved the manufacturing of them inside the company, is that not still PPAP'd parts?
     
  6. Discoducky

    Discoducky Active Member

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    Yes, technically, but not very digestible. I hope TM executives do not push this technicality as proof.
     
  7. stealthology

    stealthology Member

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    Thanks for all the responses guys.

    Basically what I'm trying to figure out is if Elon has material financial incentive to drive TSLA's market cap higher, other than just his sheer determination (which I know is good enough).

    I understand that in 2012 Tesla's board approved a grant to Elon of options to purchase ~5M shares @ an exercise price of $31.17/share. The grant consists of 10 equal vesting tranches/milestones. In order for each of the 10 tranche/milestones to vest, Tesla would also need a $4B increase in market cap. Since this program began when Tesla had a $3.2B cap, Elon will only need to reach a $43.2B cap to have his 10th tranche vest. It sounds like Elon has already completed at least 2 of the 10 tranches, allowing him to purchase ~20% of those shares (~1M shares), but interestingly enough, he hasn't done so yet.

    I was hoping The Compensation Committee could incentivize Elon with a more lofty goal, such as a $100-200B+ market cap and reward him appropriately if he gets them there.

    I'm still kind of n00bish with this stuff though, so if anyone could shed some light..
     
  8. esk8mw

    esk8mw Active Member

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    I am an executive compensation lawyer so I help structure these kinds of packages (and report them to the SEC) for a living. First, I'll say that having performance based options at all is pretty rare. Options are performance based by definition, they have no value unless the stock price increases. Options must be priced at fmv or higher as of the day of grant, so elon has a massive financial incentive to drive the sp higher. The fact that vesting is tied to milestones as opposed to other conditions (e.g., attaining some level of ebitda) is even more unusual. I'm guessing the comp cmte really wanted to incentivize tesla to stay on schedule after the roadster and s delays.

    The fact that he has not yet exercised the options is a good sign, but it is not unusual at all. Most executives with confidence in the company choose to hold off on exercising as long as possible to defer taxation. Options are taxed at exercise, not vesting. Most options have a ten year term before they expire so execs tend to wait until year 9 or so unless they have a personal need for cash earlier. Execs are acutely aware of how selling shares can be perceived in the market, by the way. They usually execute a 10b5-1 plan to do so, which basically allows shares to be sold if the price hits a specified level during a specified period, after a cooling off period. This avoids share sales as being viewed as panic selling or profit taking or whatever, and also avoids insider trading allegations.
     
  9. hockeythug

    hockeythug Active Member

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    #9 hockeythug, Dec 16, 2015
    Last edited: Dec 16, 2015
    There are no market cap requirements. Next time look up a quarterly or an annual filing.
     

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