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The 2012 CEO grant

Discussion in 'TSLA Investor Discussions' started by Clprenz, Apr 17, 2013.

  1. Clprenz

    Clprenz Member

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    anybody want to explain what this document means to us shareholders?
     
  2. dsm363

    dsm363 Roadster + Sig Model S

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    Do you have a link?
     
  3. PureAmps

    PureAmps Model S P85 (#2817)

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    I believe this may be referring to the 2013 Proxy Statement where it states:

     
  4. mitch672

    mitch672 Active Member

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    Oh it's pretty clear what that document shows... If Teslas market capitalization where 43.2 billion, you'd be looking at a $400+ per share of TSLA, if it's valuation where similar to how it's done as of today. These are all goals to try and retain Elon, and make Tesla a major player in auto manufacturing.
     
  5. deonb

    deonb Active Member

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    In short, if Elon grows the company to 10 times the valuation it is now, over the next ten years it, we will pay him $2 billion for that (5% of the stock at that time).

    Good deal for Elon. Great deal for shareholders. I wish I could buy 10-year leaps.
     
  6. PureAmps

    PureAmps Model S P85 (#2817)

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    It won't be quite that high. There will be some dilution over that time period. For example, Elon's 2009 grant is almost fully vested and if exercised would add 6.7M shares to the shares outstanding. Just that dilution alone brings the share price down to ~$350/share at $43.2 billion market cap. Add in the 2012 grant, additional employee stock based comp, and it will go even lower. Not to mention the possibility of an additional stock offering to fund Gen III. That is still an amazing valuation regardless...

    I view this as a very aggressive and public statement of their corporate goals expressed as a CEO compensation package. It will be interesting to see if there is any market reaction.
     
  7. vgrinshpun

    vgrinshpun Active Member

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    Could it be that the aggressiveness of this package would be taken by cynics as an indication of impending secondary public offering and Tesla trying to sweeten the medicine? This would be the only immediate reason that I can see that announcement of this compensation package would cause a slide in stock price.
     
  8. 30seconds

    30seconds Active Member

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    compared to other CEO vesting grants this requires some very high aspirational goals to be met for the company. we don't see the details in this excerpt, but obviously the company and Elon are not setting the goals around Tesla becoming a small niche luxury player. I would hope that the structure of the vesting package (which I have not read) has the incentives structured so that TSLA remains at least break even/ slightly profitable during the completion of these goals.

    Hopefully there is some leeway regarding near term profitability - personally I believe that the mgmt team should be given leeway if the market sees this as a high growth opportunity and pushes to a high market cap event without creation of $400-$500m annual profits. At some point the longer term returns on taking advantage of a gap in the market where you have a technological & structural edge outweighs near term profit.

    hey, maybe this keeps him from going to mars
     
  9. Robert.Boston

    Robert.Boston Model S VIN P01536

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    Elon suffers more from dilution than a buy-and-hold shareholder because:

    • The option quantity is a fixed number of options, rather than a % of stock outstanding, and
    • These are options, not grants of shares, so the percentage reduction in the value of the options is higher than the percentage reduction in the value of shares.
    That said, I cannot see how you can grow the company this aggressively without selling more equity at some point. Note, though, that current Tesla has not tapped the corporate bond market; all of the balance sheet leverage currently comes from the DoE loan (which is going away).
     
  10. kenliles

    kenliles Active Member

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    I agree- no way more equity isn't sold, likely corresponding to ModelX ramp(some) and GenIII(significant) and it's large production capitalization. Neither of which should be a problem if current sales and margins plans are met with S
     
  11. K Hall

    K Hall Member

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    #11 K Hall, Apr 18, 2013
    Last edited: Apr 18, 2013
    Stock sales are your most expensive form of financing. There are many other options available to Tesla to raise capital as Robert has hinted.
    This compensation plan tied to aggressive goals is not uncommon for a public company executive. What is unconventional is the fact that the 5 year strategic plan milestones have been laid out for all to see.
    With continued execution this company is a steal at $47.00 a share.
    I was speaking to an economist at the Federal Reserve today about Tesla. He said "It is foolish for anyone to bet against Elon Musk." He was referring to the large short interest in the stock.
    Strap your seat belts on and accumulate shares over the next 10 years. Ignore the short term movements as they are just noise in the long run. :biggrin:
     
  12. vgrinshpun

    vgrinshpun Active Member

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    I thought that milestones that are part of 2012 CEO Grant have 10 year term. Could you claify where 5 year is coming from?

    I am very curious about this as I believe that actual internal goal for 300,000 is pegged at 6 -7 years (starting on Aug of 2012)
     
  13. K Hall

    K Hall Member

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    #13 K Hall, Apr 18, 2013
    Last edited: Apr 19, 2013
    You are correct. I have never seen a 10 year strategic plan and did not review the dates. That is Far Vision. I will amend my post.
     

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