Topline
With Tesla facing slow growth and a stock market slide, shareholders will have a pair of major proposals on the slate at the electric vehicle company's annual meeting: The reinstatement of billionaire CEO Elon Musk's historic pay package months after a Delaware judge ruled it was excessive, and a plan to ditch Delaware altogether.
Tesla's board backed the reinstatement of CEO Elon Musk's massive stock awards Wednesday.
Key Facts
Tesla shareholders will vote June 13 on restoring Musk’s performance-based stock options award struck down in January by a Delaware judge, and on moving Tesla’s state of incorporation from Delaware to Texas, Tesla’s chairman of the board Robyn Denholm announced in Tesla’s preliminary annual report filed with the Securities and Exchange Commission on Wednesday.
Musk’s pay package, which was first rolled out in 2018 when Tesla’s market capitalization stood at below $60 billion, fully vested in late 2022 after Tesla hit the laid-out performance milestones, theoretically allowing Musk to boost his stake from 13% to 22%.
Tesla’s market value was $499 billion at Tuesday’s close, implying the value of the pay package is about $41 billion after accounting for the cost of exercising the options.
Denholm outlined her and Tesla’s board support for the proposal as it will impel Musk to “continue to be driven to innovate and drive growth at Tesla because the value of his shares will depend on it,” perhaps a reference to Musk’s many distractions stemming from his takeover of the social media company now known as X, adding “Elon delivered” on the “unbelievable growth and accomplishments” set forth six years ago.
Denholm said the move to Texas would better reflect the company’s outsized presence in the state, but it very well may be a move out of spite, as Musk recently moved the incorporation of his other companies X and SpaceX out of the state and bluntly said in January after the axing of his award plan, “Never incorporate your company in the state of Delaware.”
Shares of Tesla rose slightly Wednesday morning, bouncing slightly from their 11-month low set Tuesday.
Big Number
25%. That’s about how much voting control Musk seeks at Tesla, citing the company’s move into artificial intelligence and robotics. Musk added he “prefers to build products” elsewhere until that’s the case, an ominous threat considering analysts, and Musk himself, think Tesla will lean into autonomous driving and other advanced tech applications as its core electric vehicle business stalls.
Crucial Quote
Wedbush analyst Dan Ives said he “expects” shareholders to approve the 11-figure pay package and the move to Texas, enabling Musk to get his hands on the most lucrative executive compensation ever. But this underscores that there will be “more fireworks over the coming months,” according to Ives, who called on Musk to explicitly commit to his role at Tesla for the next three to five years.
Forbes Valuation
Forbes has discounted the value of Musk’s pay package by 50% pending the results of his shareholder vote, knocking him from his mantle as world’s richest man, though at $184 million, his fortune is still the third-biggest in the world.
Key Background
It’s been a dismal start to 2024 for Tesla, whose share price is down more than 35% as investors cower at the company’s declining profits and vehicle deliveries. Musk insists Tesla is simply between “waves” of growth, though the company’s announcement Monday it will axe 10% of its workforce added further fuel to concerns. Though Tesla’s share price is down 60% from its 2021 peak, it remains about 600% higher than it was when Musk’s options award was first laid out, adjusting for stock splits. Tesla will report its first batch of 2024 earnings next week, which will feature a crucial conference call from Musk.
