What does Elon Musk have to do to make Tesla trillions?

Tesla (TSLA) CEO Elon Musk thanked shareholders for approving a pay package worth nearly $1 trillion. Now comes the tricky part: what needs to be done to receive the full payout.

Before the latest plan was approved, Musk held a 13% stake in Tesla after several share sales over the past few years.

This year's package—disclosed in early September—will grant Musk 12 large tranches of stock options, tied to targets the board believes are aggressive. The total value of the 12 tranches is equivalent to approximately 424 million shares, giving Musk approximately 25% control of Tesla.

Each of these 12 tranches is tied to both an operational milestone and a market capitalization threshold.

Operational milestones include delivering Tesla's 20 millionth vehicle, deploying 1 million robot taxis, or selling 1 million Optimus robots. As part of the operational targets, Tesla's EBITDA must eventually reach $400 billion (Tesla earned a total of $16.6 billion last year).

Each target requires reaching a market capitalization threshold, with the first target requiring a market capitalization of $2 trillion, which isn't far from Tesla's current valuation of $1.5 trillion.

Ultimately, to receive the full award, Tesla under Musk's leadership must achieve a market capitalization of $8.5 trillion, in addition to meeting all operational targets.

Tesla claims that Musk will also be tied up in his shares, meaning he cannot cash out and leave the company, at least not immediately. The shares Musk earned in the new package allow him to vote with those shares upon receipt, but he cannot sell them until they vest, which will take at least 7.5 years from the time of the award.

Compensation experts argue that Tesla could have issued a special class of voting stock that would have given Musk the control he desires without a substantial financial payout. During Tesla's third-quarter earnings call, Musk claimed that this option was not possible because Tesla, unlike technology companies like Google (now Alphabet (GOOGL, GOOG)) and Facebook (now Meta (META)), incorporated without that special class of stock.

While these targets and market capitalization thresholds appear quite ambitious, Musk may have a backup plan to acquire some new shares.

Independent proxy advisor Glass Lewis, which urged shareholders to reject the package, argued that the recently approved pay package includes broad discretion for the board to approve the distribution of portions of stock, even if Musk fails to meet these standards.

Nevertheless, Wall Street bulls, including Wedbush's Dan Ives, believe Tesla is on track to achieve the first set of market capitalization thresholds.

"We believe Tesla could reach a market capitalization of $2 trillion by early 2026, and $3 trillion by the end of 2026, as its autonomous and robotics roadmaps enter full-scale production," Ives wrote on Thursday.