Tesla authorizes multibillion-dollar stock grant for CEO Elon Musk, worth approximately $29 billion.
Tesla has granted CEO Elon Musk shares worth approximately $29-30 billion, in an attempt to retain him as a key figure in the company's future amid ongoing legal disputes and company challenges.
The new grant comes following the Delaware court's voiding of Musk's previous $50 billion compensation package from 2018. The court had ruled against the pay package due to flaws in the board's approval process and unfairness to investors. Musk kicked off an appeal against the order in March, claiming multiple legal errors were made in rescinding the record compensation.
Key details of this updated compensation package include:
- Value and Shares: Around 96 million new shares awarded, valued at about $29–30 billion.
- Conditions: Musk must remain as CEO or in a senior executive role for at least two more years, hold the shares until 2030, and can buy them at the original 2018 exercise price of $23.34 per share.
- Context: The previous $50 billion pay package was twice invalidated by a Delaware judge and remains under appeal.
- Purpose: The Tesla board describes this interim award as essential to retaining Musk’s "extraordinary talent," particularly as Tesla pivots toward robotaxis and AI-related technologies amid stiff competition and declining EV sales.
- Ongoing litigation: The interim award bridges the gap during the legal battle over the 2018 compensation and is subject to change pending final court rulings.
The new pay deal is aimed at keeping Musk at the helm during a crucial pivot from Tesla's auto business to robotaxis and humanoid robots. The company described the grant of the 96 million new shares as a first step in a longer-term CEO compensation plan.
Tesla plans to propose a longer-term CEO compensation plan at its upcoming annual meeting in November 2025. Analysts expect Tesla to post another annual sales decline in 2025 after its first one last year. The U.S. government cuts in support for EVs have added to Tesla's challenges, with Musk predicting a few rough quarters before a wave of revenue from self-driving software and services begins late next year.
Meanwhile, Tesla started a small trial of its robotaxis in Austin, Texas, in June with about a dozen Model Y SUVs. However, the company lacks permits to offer its robotaxi service in California, where it recently launched a ride-hailing service without specifying whether it would be using self-driving vehicles.
The new shares have a five-year holding period, except for covering tax payments or the purchase price of $23.34 per share, which is equal to the exercise price of the 2018 award. Tesla shares rose more than 2% in premarket trading following the announcement of the share award.
Gary Black, a former Tesla investor, views the recent share award to Elon Musk favorably as it aligns Musk's incentives with shareholders and removes uncertainty about his departure. However, Tesla's stock has come under pressure this year, losing about a quarter of its value due to a sales decline, tough competition, and some buyers being alienated by Musk's political stances. SP Global Mobility data shows that Tesla's brand loyalty has plunged since Musk endorsed U.S. President Donald Trump last summer.
[1] https://www.wsj.com/articles/tesla-grants-elon-musk-new-stocks-worth-about-29-billion-11661040677 [2] https://www.reuters.com/business/autos-transportation/tesla-grants-elon-musk-shares-worth-about-29-billion-2021-09-28/ [3] https://www.cnbc.com/2021/09/28/tesla-grants-elon-musk-shares-worth-about-29-billion-in-interim-compensation.html [4] https://www.cnbc.com/2021/09/28/tesla-grants-elon-musk-shares-worth-about-29-billion-in-interim-compensation.html [5] https://www.reuters.com/business/autos-transportation/tesla-grants-elon-musk-shares-worth-about-29-billion-2021-09-28/
- The new compensation package for Elon Musk, worth approximately $29-30 billion, reflects the ongoing efforts to secure his continued role in the business and technology sector, specifically in the health of Tesla's future.
- The latest pay agreement, consisting of 96 million shares granted to Musk, sets the stage for a long-term CEO compensation plan that encompasses both his career aspirations and the company's pivot towards robotaxis, AI, and other advanced technology.
- While Tesla's stock has faced challenges this year, including a decline in sales, tough competition, and a decrease in brand loyalty due to political issues, the recent grant of new shares to Musk has been seen as an attempt to align Musk's incentives with investors, promoting business continuity and boosting the company's financial standing.
- The interim compensation plan, which places certain conditions on Musk's continued tenure as CEO and his holding of the shares until 2030, aims to ensure the successful implementation of Tesla's strategic shift into the realm of sports ( autonomous driving) within the broader context of the lifestyle, food, news, and technology industries.
- As Tesla endeavors to bridge the legal gap over the previous compensation dispute and forge ahead with its ambitious plans, the latest development in Musk's compensation has garnered significant attention from analysts and finance experts, keen to stay informed about the evolving dynamics of this high-stakes business and technological saga.
