Tesla has provided an interim stock grant worth roughly $30 billion to CEO Elon Musk, aimed at keeping the billionaire engaged with the automaker amid ongoing litigation regarding a 2018 pay package. A regulatory filing submitted on Monday reveals that the new arrangement includes 96 million shares, which will become fully vested if Musk continues in his role for another two years. The restricted stock has an exercise price of $23.34, identical to that in the previous 2018 compensation package.
Tesla’s shares surged by as much as 2.9% before the start of regular trading in New York. By the close on Friday, the company’s stock had seen a decline of 25%, in contrast to a 6% increase for the S&P 500. In a letter to shareholders released on Monday, the board emphasized the importance of retaining Musk, stating that this award acts as an initial “good faith” payment. “After all, a ‘deal is a deal,’” they noted. They also mentioned that a proposed long-term CEO compensation plan will be put to a vote during the EV maker’s annual meeting on November 6.
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This action follows the annulment of a prior compensation strategy valued at over $50 billion by the Delaware Chancery Court due to a shareholder lawsuit that is currently under appeal. A special committee is exploring options for a new compensation agreement after Tesla shifted its legal residence to Texas last year. This committee is made up of chair Robyn Denholm and board member Kathleen Wilson-Thompson.
In light of the ongoing legal challenges, the board recognized the urgent need to secure Musk “given the growing competition for AI talent and Tesla’s pivotal role.”
The awarded shares require Musk to remain in a senior leadership position at Tesla throughout the two-year vesting period and to hold the shares for five years from the grant date. Should the Delaware courts restore the 2018 performance award in its entirety, Musk will be obligated to forfeit or return the interim award. “To put it plainly, there cannot be any ‘double dip,’” stated the filing.
The board indicated that shareholders had previously endorsed a major stock award for Musk, underscoring the necessity for Tesla to retain essential talent, especially the CEO, as the company expands its operations into AI and robotics alongside its automotive and energy ventures.
“We believe it directly addresses a key concern and priority for both shareholders and the Board: focusing and invigorating Elon on Tesla to drive the company into its next growth phase while we persist in our legal efforts to restore the 2018 CEO Performance Award,” the letter asserted.
This initiative highlights Musk’s strong grip on the company and indicates he is unlikely to step down from the CEO position anytime soon. Musk has held the top executive role at the automaker since 2008 and mentioned in a Bloomberg interview in May that he plans to continue that role for at least the next five years.
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Tesla’s board continues to back Musk despite his many responsibilities. This year, in addition to overseeing four other companies, Musk has dedicated considerable attention to political matters, including financing President Donald Trump’s reelection campaign and leading the DOGE initiative to reform federal governance, actions that have sparked backlash against the electric vehicle manufacturer.
“While we recognize that Elon’s diverse ventures and potential distractions consume much of his time, including his leadership roles at xAI, SpaceX, Neuralink, X Corp., and the Boring Co. among other interests, we are confident this award will encourage him to stay at Tesla,” the board expressed in its letter. “To be clear, losing Elon would not only mean parting with his talents but also the exit of a leader who attracts and retains talent at Tesla.”
This decision has received positive feedback from various investors and analysts. It “removes an overhang on the stock” and likely ensures Musk will remain as CEO for several more years, noted Wedbush analyst Dan Ives. “Musk remains Tesla’s most valuable asset, and this compensation issue has consistently been a concern for shareholders.”
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