Welcome to Tesla Motors Club
Discuss Tesla's Model S, Model 3, Model X, Model Y, Cybertruck, Roadster and More.
Register

Tesla, Elon Musk, and meeting internal Performance Goals

stealthology

Member
Jan 24, 2013
467
642
Hawaii
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
 

techmaven

Active Member
Feb 27, 2013
3,618
9,711
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:

Performance-based Stock Option Grant:
· 1/4th of the shares subject to the options are scheduled to vest upon completion of the first Model X Production Vehicle;

· 1/4th of the shares subject to the options are scheduled to vest upon achieving aggregate vehicle production of 100,000 vehicles in a trailing 12-month period;

· 1/4th of the s hares subject to the options are scheduled to vest upon completion of the first Gen III Production Vehicle; and

· 1/4th of the shares subject to the options are scheduled to vest upon achievement of annualized gross margin of greater than 30.0% in any three years
The following performance milestone was achieved in the third quarter and ratified by the Compensation Committee on October 6, 2015.

· Completion of the first Model X Production Vehicle

2012 CEO Grant:

As of September 30, 2015, the market conditions for seven vesting tranches and the following performance milestones were achieved and approved by our Board of Directors:

· Successful completion of the Model X Alpha Prototype; and
· Successful completion of the Model X Beta Prototype

As of September 30, 2015, the following three performance milestones were considered probable of achievement:

· Successful completion of the Model 3 Alpha Prototype
· Aggregate vehicle production of 100,000 vehicles; and
· Successful completion of the Model 3 Beta Prototype

The following performance milestone was achieved in the third quarter and ratified by the Compensation Committee on October 6, 2015.

· Completion of the first Model X Production Vehicle
 

Discoducky

P100DL, 2021 M3, 3 CT reservations and counting
Dec 25, 2011
3,421
3,274
Seattle
· Completion of the first Model X Production Vehicle
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.
 

techmaven

Active Member
Feb 27, 2013
3,618
9,711
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.

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?
 

Discoducky

P100DL, 2021 M3, 3 CT reservations and counting
Dec 25, 2011
3,421
3,274
Seattle
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?
Yes, technically, but not very digestible. I hope TM executives do not push this technicality as proof.
 

stealthology

Member
Jan 24, 2013
467
642
Hawaii
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..
 

esk8mw

Active Member
Oct 6, 2015
1,333
7,030
Midwest
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..

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.
 

hockeythug

Active Member
Jun 3, 2013
1,979
879
Minnesota
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..

There are no market cap requirements. Next time look up a quarterly or an annual filing.
 
Last edited:

About Us

Formed in 2006, Tesla Motors Club (TMC) was the first independent online Tesla community. Today it remains the largest and most dynamic community of Tesla enthusiasts. Learn more.

Do you value your experience at TMC? Consider becoming a Supporting Member of Tesla Motors Club. As a thank you for your contribution, you'll get nearly no ads in the Community and Groups sections. Additional perks are available depending on the level of contribution. Please visit the Account Upgrades page for more details.


SUPPORT TMC
Top