(Bloomberg) -- A short-lived surge in Lucid Group Inc.’s share price last year allowed Chief Executive Officer Peter Rawlinson to collect more than $260 million in performance-based awards.
Shares of the electric carmarker, founded in 2007, have since plunged by two-thirds as it wrestles with supply chain issues while attempting to scale up production.
The early payout to Rawlinson, a former top designer of Tesla Inc.’s Model S, illustrates a challenge that many corporate boards face in an era of volatile stock prices: How to incentivize executives to deliver long-term gains while not rewarding them for unsustained spurts in market value.
Lucid’s board awarded Rawlinson about 13.8 million time-based units of stock in March 2021 that vest over four years beginning at the end of 2021, plus 16 million performance-based stock units. The company valued the entire award at $556 million, according to a filing on Thursday, making it one of the largest compensation packages paid to any executive last year.
November Peak
Lucid began trading publicly in July and by November reached a market capitalization of $91 billion. Its market value remained high enough over a six-month period for Rawlinson to collect four of the five tranches of performance-based units, according to the filing. His newly vested performance stock is worth $263 million at Thursday’s closing price in New York.
Rawlinson can still collect the remaining 2.1 million performance-based units if the company’s market value rises to about $70.5 billion and remains there for six months. But he stands to earn far more simply by staying at Lucid for the next four years.
A spokesperson for Newark, California-based Lucid declined to comment.
Many public companies have recently started awarding their CEOs or founders large grants of stocks, often tied to ambitious share-price or market-value targets. Still, forces outside their control have sometimes resulted in those grants paying out prematurely or in unforeseen ways.
DraftKings, AMC
In 2020, five executives at DraftKings Inc. collected shares worth almost $500 million just months after a new compensation plan was put in place when the company went public through a merger with a special purpose acquisition company, causing shares to surge.
Adam Aron, CEO of AMC Entertainment Holdings Inc., unlocked 500,000 shares when the stock of his company ballooned in January 2021 due to a surge in retail buying.
The granddaddy of all “moonshot” awards was the package awarded Tesla’s Elon Musk in 2018, which has paid out about $75 billion. Musk’s windfall, however, wasn’t due to brief fluctuations in Tesla’s stock price, but rather a steady, meteoric rise.
Lucid’s stock jumped in the run-up to shipping its first electric cars in the fourth quarter of 2021. By Thursday’s close, shares had dropped 67% from their November high of $57.75 on concerns about supply-chain struggles and a lowered production goal for 2022.
Lucid has also said it needs more cash to fund its plans, which includes building a second factory in Saudi Arabia. It raised $2 billion in convertible debt in December. Those notes traded at 69.4 cents on the dollar Wednesday, according to Bloomberg Intelligence’s Joel Levington, who says the startup may have to sell more stock to raise funds.
©2022 Bloomberg L.P.
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