Elon Musk Will Receive 1 Billion Shares of SpaceX Stock If the Company Hits This Mind-Blowing Milestone

SpaceX is set to launch its initial public offering (IPO) on June 12, and its public debut is poised to make history. The company plans to sell 555,555,555 shares at a fixed price of $135 per share, raising $75 billion in capital. At that valuation, the space-tech company will have a market capitalization of roughly $1.77 trillion -- making it by far the biggest IPO in history.

SpaceX published its IPO prospectus on May 20, giving investors a detailed look into the company's financials, growth initiatives, and risk outlook. For example, the document shows that SpaceX recorded $18.7 billion in revenue last year and posted a net loss of $4.9 billion in the period. Notably, the document also includes a shocking performance-based incentive that could see CEO Elon Musk awarded 1 billion shares of SpaceX stock.

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Musk could see a massive reward for establishing a Mars colony

According to SpaceX's prospectus, CEO Elon Musk is set to receive 1 billion shares of SpaceX stock if the company successfully establishes a colony on Mars that is home to at least 1 million inhabitants. Notably, the total number of shares at play in the performance-based award for Musk related to the potential Mars colony is roughly 80% more than the initial tranche of stock to be sold in SpaceX's IPO.

Elon Musk, who is also CEO of Tesla, has long held establishing a colony on Mars as a personal goal and a key corporate initiative for SpaceX. The company is targeting uncrewed cargo flights to the planet as early as 2028, and it plans to bring Tesla's Optimus robots to the planet to help begin exploration and start construction initiatives that could pave the way for humans to inhabit the planet.

While plans for a Mars colony capable of supporting 1 million human inhabitants, and the potential achievement tied to a massive stock allotment for Musk if the goal is reached, are naturally generating some excitement, investors should still keep their expectations in check. Establishing a sustainable colony on Mars capable of supporting a million inhabitants is an incredible undertaking, and there's still a lot of uncertainty when it comes to when, and if, the company's vision is achievable.

Based on the stock's fixed IPO price of $135 per share, Elon Musk would be set to receive $135 billion worth of stock if his company leads the way in establishing a Mars colony with at least a million inhabitants. Given the incredible complexity of that kind of undertaking, the performance-based award doesn't actually look particularly exorbitant.

If Musk and SpaceX succeed in their Mars colony goals, the company's share price will likely surge far above the $135-per-share level set at its IPO. On the other hand, it's possible that the performance-based award tied to the Mars colony was at least partially created to drum up excitement surrounding the SpaceX IPO -- and investors should understand that the stock looks risky ahead of its public debut.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.