Tesla (TSLA) has moved to present Elon Musk about $26 billion price of shares as a part of a brand new CEO compensation plan with out shareholders’ approval.
The corporate’s final CEO award dates again to 2018, however it was rescinded by a choose final yr after an extended litigation decided that CEO Elon Musk just about negotiated the award in opposition to himself because of his management of the board.
In a letter to shareholders, Tesla’s board described the brand new award, which is defined as an “interim award to make it proper by Musk”:
- 96 million restricted shares of inventory, topic to Elon paying a purchase order worth upon assembly a two-year vesting time period, to be delivered after receipt of antitrust regulatory approval;
- The acquisition worth might be equal to the break up adjusted train worth of the inventory choices awarded to Elon underneath the 2018 CEO Efficiency Award ($23.34 per share);
- A requirement that Elon serve constantly in a senior management function at Tesla through the two-year vesting time period;
- A pledging allowance to cowl tax funds or the acquisition worth;
- A compulsory holding interval of 5 years from the grant date, besides to cowl tax funds or the acquisition worth (with any gross sales for such functions to be carried out by an orderly disposition in coordination with Tesla); and
- If the Delaware courts totally reinstate the 2018 CEO Efficiency Award, this interim award might be forfeited or returned or a portion of the 2018 CEO Efficiency Award might be forfeited. To place it merely, there can’t be any “double dip.” Elon will be unable to maintain this new award along with the choices he might be awarded underneath the 2018 CEO Efficiency Award ought to the courts rule in our favor.
Tesla made it sound like this award has been routinely awarded after board approval, and in contrast to earlier awards, Tesla shareholders gained’t vote on it.
Right here’s how the brand new compensation package deal differs from the earlier one:
| Side | 2018 CEO Efficiency Award | 2025 CEO Interim Award |
|---|---|---|
| Construction | Inventory choices (303.96 million shares, post-stock-split adjusted) with an train worth of $23.34 per share. | Restricted inventory (96 million shares) with a purchase order worth of $23.34 per share (matching the 2018 train worth). |
| Vesting Circumstances | Efficiency-based: Vested in 12 tranches, every requiring Tesla’s market cap to extend by $50 billion (as much as $650 billion complete) plus income or adjusted EBITDA milestones. Totally vested by early 2023 in spite of everything targets had been met. | Time-based: Vests after 2 years of steady service in a senior management function at Tesla. No efficiency milestones required. |
| Worth | Grant-date honest worth: ~$2.3 billion. Potential realized worth: As much as ~$56 billion (fluctuated with inventory worth; valued at ~$46.8 billion in mid-2024). Internet worth trusted inventory appreciation above strike worth. | Gross worth: ~$29 billion (primarily based on Tesla’s inventory worth of ~$300 per share). Internet worth after buy worth: ~$26.7 billion. |
| Length/Time period | 10-year plan, with milestones spanning the total interval. | 2-year vesting interval, plus a 5-year necessary holding interval after grant (apart from protecting taxes or buy worth). |
| Threat and Alignment | Excessive threat/excessive reward: Tied to unprecedented progress targets (e.g., market cap from ~$50B to $650B+), leading to ~$735 billion in shareholder worth created. Musk obtained no base wage or different pay throughout this time. | Decrease threat: Primarily retention-focused, with vesting assured upon service. Contains provisions for pledging shares to cowl taxes/buy worth. Interim nature ties it to ongoing 2018 authorized decision. |
| Extra Phrases | Required shareholder approval (handed in 2018, reaffirmed in 2024). No specific long-term maintain requirement past normal govt guidelines. | Requires antitrust regulatory approval. If 2018 award is reinstated, that is offset/forfeited. Permitted by board’s particular committee (Musk recused). An extended-term compensation technique is deliberate for shareholder vote in November 2025. |
| Goal/Context | Lengthy-term incentive to drive explosive progress in EVs and vitality. Musk’s first main comp since 2012. | Interim retention amid AI/robotics pivot and expertise competitors. Acknowledges previous worth from 2018 milestones whereas authorized battles proceed (no significant pay for Musk since 2017). |
Individually, the board additionally introduced {that a} new “longer-term” CEO award is being put collectively by the board and might be introduced on the upcoming shareholders’ assembly in November.
Electrek’s Take
One of many greatest paydays in historical past, and it’s to the CEO of an organization in evident decline with web revenue in freefall for the final two years.
Nevertheless, it’s moot to debate present efficiency since Tesla clearly frames this as a option to exchange the 2018 compensation package deal.
But it surely’s nonetheless unimaginable that to unbiased outsiders watching Tesla, the corporate is clearly in decline. But, Tesla’s board has simply given Musk $26 billion, regardless of him being undoubtedly liable for this decline, and says that it’ll provide him an even bigger, longer-term contract quickly on prime of it.
It’s going to be onerous to beat the allegations that the board is fully in his pocket after that.
Additionally, that’s regardless of Musk already being the individual most incentivize to make Tesla succesful as the most important Tesla shareholder and him breaching his fiduciary obligation to shareholders final yr when he threatened to not construct AI merchandise at Tesla, somethign he stated was essential to the corporate’s success, if he didn’t get 25% management over the corporate’s shares.
This new grant will solely bump him to a couple of 15% stake.
I anticipate this new compensation package deal in November to push him to 25%.
At the newest earnings assembly, Musk said that his aim for higher management over Tesla is to make sure that activist traders can’t oust him, however “not a lot management that he can’t be thrown out if he goes loopy.”
He already went loopy and the board rewarded him with a $26 billion payday and an upcoming new compensation plan.
He clearly already has loads of management over the corporate.
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