Tesla Joins $1 Trillion Dollar Market Cap Club

Tesla finally joined the trillion market cap club yesterday. Its stock price hit $1,036.63 yesterday afternoon and settled just under $1,025. This gave the company a market valuation of $1.01 trillion. 

RELATED: Musk To Move Tesla Headquarters From California to Texas

Tesla Joins The Trillion Dollar Market Cap Club

With its one trillion dollar market cap value, Tesla joins the exclusive Trillion Market Cap Club lorded by America’s largest tech firms. This puts the electric vehicle maker among elite companies.

This includes the biggest American tech names such as Apple, Microsoft, Alphabet (Google), Facebook, and Amazon.  

Tesla reached the trillion dollar market cap thanks to rising share prices. The company announced strong earnings last week which started the rise.

Then on Monday, car rental giant Hertz announced that it will purchase 100,000 Teslas to augment their fleet. Tesla will complete the delivery of the cars by 2022. Analysts estimate the price tag at $4.2 billion. 

Tesla Shares On The Rise

Since January, Tesla shares rose meteorically by $300. This translates into a 40% increase over the previous ten months. Despite a worldwide microchip shortage, Tesla managed to deliver its cars better than its rivals.

In fact, Tesla managed to deliver 240,000 vehicles in the third quarter. This number is 70% more than it did during the same quarter last year. Surprisingly, not all of Tesla’s facilities are running at capacity.

The record number of deliveries the previous quarter can thank the Shanghai, China factory. Model Y production in the China plant ramped up this year, according to CFO Zach Kirkhorn during Tesla’s earnings call.  

With the aim of a trillion dollar market cap value out of the way, a new question emerges. How long can Tesla remain a trillion dollar market cap company? Despite its production improvements, Tesla continues to clash with government agencies.

Recently, the National Highway Traffic Safety Administration called out Tesla’s refusal to issue a recall. A dozen vehicles driving via autopilot collided with parked first-responder vehicles. Instead of recalling the models, Tesla simply released a software update on the autopilot program. 

Musk Will Also Receive A Windfall

Meanwhile, Tesla faces a crowded field in the electric vehicle market. Legacy automakers such as Ford and GM are releasing EV models of their bestselling pickups.

Lucid Motors, a relative newcomer, released an EV that boasts of a range 100 miles farther than any Tesla.  Despite the incoming challengers, Tesla is happily embracing its trillion dollar spotlight. 

Tesla’s market success means more money for its CEO, Elon Musk. With the stock close,  Musk's 23% stake in Tesla is now a cool $230 billion. This holding includes options worth over $50 billion.

These options remain vested under Musk's 2018 compensation package. In addition, Musk also owns a large chunk of SpaceX as its CEO. Recently, SpaceX’s value reached $100 billion. 

Musk Doesn’t Earn A Salary At Tesla

Instead of a regular salary, Musk’s pay package includes 12 options tranches. These vests when the company hits certain milestones. The options allow the CEO to buy Tesla shares at $70 each.

This is the equivalent of a 90% discount from the current price. Tesla's recent six-month average stock market valuation is over $650 billion. The results resulted in activating all 12 options that Musk possesses.

As long as Tesla continues to hit its revenue and earnings targets, he should have clear access to make the stock purchase deal of the century.    

Watch the CNBC Television video reporting that Tesla hit an all-time high $1 trillion valuation:

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