Tesla has granted chief executive officer Elon Musk an interim stock award valued at approximately $30 billion (around $46 billion) as part of efforts to retain his leadership amid ongoing legal disputes regarding a previous compensation package from 2018. The new agreement, disclosed in a regulatory filing, includes 96 million shares that will vest if Musk remains in his position for an additional two years. This stock grant has an exercise price set at $23.34, consistent with the price from the former compensation plan.
The decision to award Musk underscores his significant influence over Tesla, even as the company faces challenges such as declining electric vehicle sales and a drop in its stock price. As of the last trading session, Tesla’s shares had fallen by 25 percent this year, contrasting sharply with a 6 percent increase in the S&P 500 index. Shares rose as much as 3.1 percent to reach $312.12 in New York before settling to a gain of about 2 percent in late trading.
Strategic Importance of Musk’s Leadership
Musk, who is currently the world’s richest person, has expressed a desire to increase his stake in Tesla as he pivots the company towards innovative technologies, including artificial intelligence and autonomous vehicles. In a letter to shareholders released on Monday, the board of directors highlighted the necessity of retaining Musk, describing the stock award as a “first step” and a demonstration of “good faith.” They emphasized that “a deal is a deal,” indicating a commitment to a longer-term compensation strategy that will be presented for a vote at Tesla’s annual meeting on November 6.
This latest move has received favorable reactions from some investors and analysts. Wedbush analyst Dan Ives characterized the decision as a means to “remove an overhang on the stock” and suggested that it enhances the likelihood of Musk’s continued tenure as CEO. He noted that Musk remains a pivotal asset for Tesla and that the previous compensation concerns had been a persistent issue for shareholders.
The financial implications of the new award are significant. Based on current trading prices, Musk will need to pay a total of $2.24 billion to exercise the stock options, as he must pay $23.34 per share to collect the full value of the award. This structure, reminiscent of historical practices where companies issued options at earlier, lower prices, raises questions about best practices in executive compensation.
While backdating stock options is currently legal, it has been associated with numerous corporate scandals in the past, leading to increased scrutiny of such practices. As Tesla navigates these complexities, the board’s actions reflect both an effort to stabilize leadership and the company’s future trajectory.
