Tesla has delivered billionaire Elon Musk a massive reward – a stock package worth $ 29 billion – in one step to keep him firmly responsible as the company shifts focus from cars to Robotaxis and humanoid robots.
The electric car giant has said that New Deal is a show of confidence in Musk’s management at a time when Tesla is facing falling sales, fierce competition and questions about CEO’s political involvement and other business companies.
The company described the “Interim Award” of the 96 million new shares as a first step, “Good Faith” payment to honor Musk’s more than $ 50 billion pay package from 2018, which was beaten by a Delaware Court last year.
Musk may require the new price if he remains in a top role for another two years, and a court does not reintroduce the 2018 package that is currently on appeal.
He has to keep the shares for five years and can buy them for $ 23.34 per day. Share, the same as the exercise price for the 2018 price. Tesla will also set a long-lasting CEO compensation plan at its annual investor meeting on November 6.
The move is intended to keep Musk, Tesla’s public face and architect for its Robotaxi strategy, focused on the electric vehicle manufacturer as it navigates a shift to cybercabs and robotics from its MAINSTAY AUTO business.
It also seems to dampen any speculation that the board’s patience with Musk could bear thinly due to the recent tumultuous months, including the CEO’s steps to politics.
The move to give Musk greater control over the company suggests that directors still see him as best suited to tackle Tesla’s growing list of challenges in the coming years.
Sales have fallen in the company due to its aging vehicle set -up, fierce competition and Musk’s right -wing political positions that have spotted its brand.
S&P Global Mobility Data, which was divided exclusively with Reuters, showed on Monday that Tesla’s brand loyalty had been thrown since Musk approved US President Donald Trump last summer.
Musk’s commitment to politics and his wider business empire, including AI -starting Xai, has also caused concern about his devotion to Tesla, the most important source of his wealth. Musk has threatened to leave unless he gets more control over Tesla.
The new stock price will take its Tesla share, already the largest, to more than 15% from the 12.7% currently, according to Reuters calculations based on data prepared by LSEG.
Before Monday’s appropriation, Musk had no active compensation plan, and Tesla said he had not received meaningful wages since 2017. With the legal match of his 2018 package, which is expected to continue, the board said it moved to preserve Musk’s “extraordinary talent.”
Talent magnet
“While we recognize Elon’s business enterprises, interests and other potential demands on his time and attention are extensive and far -reaching … We are convinced that this award will incentive Elon to remain in Tesla,” said a special committee that Tesla formed this year to consider Musk’s compensation. It consists of chairman Robyn Denholm and the independent director Kathleen Wilson-Thompson.
The company said it would not detect the cost of compensation for the price, as it does not currently expect the performance condition to be “probable to be met.” It will reassess and recognize the expense if it decides that the allocation is likely to be met, including after the two -year vesting period.
Last year, the company said a new compensation package for Musk on a par with the 2018 plan would result in an accounting tax of more than $ 25 billion. While the plan revealed on Monday is about a third of the size of the 2018 plan, the share price has almost doubled in the past year, increasing the potential costs.
“The compensation costs for Tesla here will be fierce,” said Lawrence Fossi, who publishes a newsletter that is critical of Tesla.
The new shares will also be lost or offset if the Delaware courts fully reintroduce the stock price for 2018, which ensures that there is no “double dip”, the special committee said.
Investors and analysts welcomed the news where Tesla shares rose almost 2% in early trade. The stock has lost a quarter of its value this year, from the last close.
“Under normal circumstances, a billions compensation package would raise some eyebrows. (But) has clearly benefited investors benefited from Musk’s management of Tesla,” said Camelthorn Investment’s adviser Shawn Campbell, who owns Tesla shares. “This stock fellow binds Musk to Tesla for the next two years.”
Fight for pay
The Delaware decision on Musk’s payroll package in 2018, the largest in Corporate America, had cited deficiencies in the board’s approval process and unreasonable to investors. Musk started an appeal against the order in March and claimed that a judge with lower court made several legal errors in interrupting the record compensation.
He has claimed that the package resulted in spectacular growth for Tesla and yet was established by the lower Court Court of Chancing to be unfair to shareholders who voted twice to approve the plan.
Tesla shares have risen nearly 2,000% over the last decade, which is far better than over 200% increase in the benchmark S&P 500 index during the same period.
“This is simply a repackaged version of what was done many years ago and was controlled incorrectly by a judge. It makes the Delaware court’s decision effectively meaningless,” said Charles Elson, founder of the Weinberg Center for Corporate Governance at the University of Delaware.
“You don’t have to incentive him to stay. If he leaves, he throws 13% of the business, which is still a huge part of his net worth,” said Elson, who had filed Amicus threats, supporting the court’s decision to cancel Musk’s 2018 award.
