Elon Musk’s compensation package at Tesla is based entirely on various benchmarks tied to revenue and the company’s stock price. Put in place in 2018, Musk in theory could by 2028. Today, Tesla said the first tranche of those stock options has vested.

That tranche is, on paper, worth about $775 million, , based on Tesla’s current stock price of around $800.

That sounds like a lot of money—and it is–but according to the way the compensation is structured, Musk will have to wait to cash out, if he ever does. Specifically, Musk will have to wait five years after exercising the option to sell the shares and cash in. That means that the options aren’t worth anything more than what Tesla’s stock price will be five years after Musk exercises them, not what the stock price is now.

Here is the :

In particular, the 2018 CEO Performance Award is comprised of 12 equal tranches, each vesting only upon the achievement of a market capitalization milestone matched to one of eight revenue-based operational milestones or eight Adjusted EBITDA-based operational milestones, all of which were viewed as difficult hurdles at the time of grant. While our stockholders benefit from each incremental increase in Tesla’s performance and stock price, aligning their interests with Mr. Musk’s incentives, the tranches under the 2018 CEO Performance Award vest only upon the full achievement of specific milestones, making it even more challenging for Mr. Musk to realize value from such increases. As of the date of this proxy statement, one of the 12 tranches under this award has vested and become exercisable, subject to Mr. Musk’s payment of the exercise price of $350.02 per share and the minimum five-year holding period generally applicable to any shares he acquires upon exercise.

[...]

As of the date of this filing, (i) one operational milestone relating to $20.0 billion total revenue and (ii) one market capitalization milestone of $100 billion have been achieved and certified by the Board. In addition, one other operational milestone relating to $1.5 billion Adjusted EBITDA has been achieved but is subject to formal certification by the Board, and no other market capitalization milestones have been achieved. Consequently, one tranche under the 2018 CEO Performance Award, corresponding to an option to purchase 1,688,670 shares of Tesla’s common stock, has vested and become exercisable as of the date of this filing, subject to Mr. Musk’s payment of the exercise price of $350.02 per share and the minimum five-year holding period generally applicable to any shares he acquires upon exercise.

It wasn’t clear Thursday if Musk had exercised, but he now has the right (per CNBC) to buy 1.7 million shares of Tesla at a price of $350.02 per share. Musk’s potential profit—and where that $775 million figure comes from, based on Tesla’s current stock price—is the difference between the $350.02 price and Tesla’s stock price at the time he sells.

That is a bet for Musk, in other words, that Tesla’s stock price in 2025 (if he exercises the option this year) will be above $350, which honestly feels like a pretty risky proposition. Because as much as there is an upside to compensation structured this way there is a downside as well, since if Musk exercises and in five years Tesla stock is worth, say $100, Musk will be out the difference between that and $350 (about $425 million if I’m doing my math right, since buying 1.7 million shares at $350/share would cost around $595 million, and 1.7 million shares are worth $170 million at a stock price of $100).

That is also the reason why Musk’s defenders say he deserves a pay package like this, because it’s structured to have him put real skin in the game.

You can read the whole SEC filing .