A Delaware judge voided a 2018 compensation plan tied to Tesla Inc TSLA CEO Elon Musk on Tuesday, a move that could impact the wealth of the world's richest man.
Here's a look at how much investors could have made investing in Tesla the time the compensation plan was announced.
What Happened: A $55.8 billion compensation plan was announced by Tesla in 2018 that tied his potential earnings to items like the market capitalization, trailing twelve-month revenue and adjusted EBITDA of Tesla.
"Tesla today announced a new 10-year CEO performance award for Elon Musk with vesting entirely contingent on achieving market cap and operational milestones that would make Tesla one of the most valuable companies in the world," the company said at the time.
The company said for Musk to hit the full compensation plan, Tesla's market capitalization would have to grow to $650 billion. Tesla modeled the 2018 compensation plan after a similar one that was awarded in 2012 that came before the company’s market capitalization increased "17-fold" in five years.
As part of the compensation package, Musk would receive no salary, no cash bonuses and no equity, instead having compensation tied to the performance awards "which ensures that he will be compensated only if Tesla and all of its shareholders do extraordinarily well."
The board granted the award to Musk on Jan. 21, 2018 and said it would be subject to shareholder approval at a special meeting in March 2018. Shareholders later approved the compensation plan.
Tesla went on to hit all the milestones in the compensation plan, unlocking billions of dollars worth of Tesla options for Musk.
As predicted, shareholders of Tesla would have done extraordinarily well from the time of the compensation plan announcement to today.
The judge's ruling Tuesday could lead to Musk losing out on options he had previously earned, which could drop his wealth. Bloomberg reported that Musk's wealth could fall from $205 billion to $154.3 billion, which would take him from the richest person in the world to the third-richest person.
Musk and Tesla can also appeal the ruling.
Related Link: Elon Musk Wants To Own 25% Of Tesla: Here’s How Much Of The EV Stock The CEO Owns
Investing $1,000 in Tesla Stock: Regardless of what happens to Musk's compensation plan and options that were unlocked, investors who bought shares of Tesla stock when the compensation plan was announced could still be smiling Wednesday.
An investor could have purchased 41.61 Tesla shares with $1,000 on Jan. 23, 2018 when the compensation plan was announced, based on a split-adjusted price of $24.03.
The 41.61 shares would be worth $7,767.75 today, based on a share price of $186.68 at the time of writing. This represents a potential return of 676.8% over the last six years.
For comparison, the SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500 broad market index, didn't perform as strong. A $1,000 investment in the SPDR S&P 500 ETF Trust could have purchased 3.90 shares at the time same time, based on an adjusted price of $256.20. Today, the investment would be worth $1,904.96. This represents a return of 90.5% over the last six years.
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