Key Points
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Elon Musk’s $1 trillion pay package with Tesla is split into 12 tranches, with each requiring completion of a market cap and operational milestone.
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Tesla shareholders would see their positions grow significantly if the company reaches these milestones.
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Milestones involving robotics, FSD subscriptions, and robotaxis all help diversify Tesla’s revenue streams.
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Last November, Tesla (NASDAQ: TSLA) shareholders approved a $1 trillion pay plan for CEO Elon Musk. It’s the largest executive pay package in corporate history and would raise Musk’s voting power in Tesla from 13.6% to 24.9%.
The enormous pay plan could benefit Tesla shareholders, provided Musk can meet the lofty performance requirements built into the 10-year deal.
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The hurdles built into Musk’s $1 trillion pay plan
Musk’s pay package is split into 12 tranches that total about 424 million restricted shares. Each tranche requires Tesla to meet a market cap milestone and an operational milestone. Market cap milestones start at $2 trillion and increase by $500 billion up to $6.5 trillion, with two more of $7.5 trillion and $8.5 trillion. To complete each market cap milestone, Tesla’s trailing six-month and trailing 30-day average market cap must meet the threshold.
Operational milestones are:
- 20 million vehicles delivered
- 10 million active Full-Self Driving (FSD) subscriptions
- 1 million robots delivered
- 1 million robotaxis in commercial operation
- Adjusted EBITDA milestones of: $50 billion, $80 billion, $130 billion, $210 billion, $300 billion, $400 billion (there are three operational milestones of $400 billion in adjusted EBITDA, to be met over separate, non-overlapping four-quarter periods)
Musk has until September 2035 to meet these milestones. Completing all 12 seems like it would require a miracle. Tesla hasn’t delivered any robots yet, and its 2025 adjusted EBITDA was $14.6 billion, a far cry from $400 billion. The biggest goal, a market cap of $8.5 trillion, is about six times higher than what Tesla’s worth at the time of this writing (Sept. 11).
Of the operational milestones, the easiest is 20 million vehicles delivered, especially because this requirement is for cumulative deliveries throughout Tesla’s operating history. It passed 10 million vehicles delivered in Q3 2026, so it’s already halfway to this milestone. Milestones of $50 billion and $80 billion in adjusted EBITDA also look doable, and 10 million active FSD subscriptions is possible — it currently has 1.48 million as of Q2 2026.
How Tesla shareholders benefit
In a best-case scenario where Musk earns all 12 tranches, Tesla would go from 3.95 billion outstanding shares to 4.37 billion. It would also have a market cap of $8.5 trillion, meaning each share would be worth roughly $1,945. Compared to Tesla’s current price of $365, that would represent a growth of 433%.
As mentioned, the best-case scenario doesn’t look realistic. But Musk and shareholders would still benefit from the completion of the lower market cap and operational milestones, as the company would be growing in value. The more ambitious goals also require Tesla to make significant strides in robotics, FSD, and robotaxis, areas that would make it a more diverse business and offer better margins than auto sales.
A net positive
The headline figure of $1 trillion in compensation for Musk may have gotten most of the attention, but the terms of the deal are largely what investors should want. The incentives align with lofty performance targets. For Musk to earn even four out of 12 tranches of stock options, Tesla would need to hit multiple operational milestones and reach a market cap of $3.5 trillion.
Crucially, Tesla can’t hit the higher targets solely as an automaker. It will need to see legitimate growth as a robotics company and with its robotaxi service, both of which would give the company much greater upside as an investment. Considering what Tesla has to do for Musk to earn this pay plan, it’s clear why over 75% of shareholders voted in favor of it.
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Lyle Daly has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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