Tesla's proposal of a $30 billion package for Elon Musk - here's the break-down
Tesla Approves New $29 Billion Stock Package for Elon Musk
Tesla, the leading electric vehicle manufacturer, has approved a new stock package worth approximately $29 billion for CEO Elon Musk. This new package, allocated under a 2019 Equity Incentive Plan already approved by shareholders, does not require a new shareholder vote.
The move to approve this new compensation package was necessitated by the legal defeat and the invalidation of Musk's earlier $50 billion compensation package. The Delaware court declared the earlier package invalid following a shareholder lawsuit.
Unlike the heavily performance-hurdled 2018 package, the new award requires Musk to remain as CEO or in a senior executive role for the next two years and to hold the shares until 2030. This will increase his Tesla stock ownership from around 13% to 15%.
The board emphasized the need to retain Musk amid fierce AI competition, noting that even unprecedented compensation is necessary to keep him focused and recruiting AI talent. The grant is the first step towards a "good faith" payment, they stated, as the legal battle over the 2018 package continues on appeal.
The exercise price of the tied-up shares matches the price of the originally agreed-upon deal in 2018, at $23.34. The board also said in a letter to shareholders that a deal is a deal, indicating a strong commitment to the agreement.
The positive stock reaction, with a 2.7% rise to $310.80 in pre-market trading, is understandable as it reduces short-term uncertainty about the company's leadership. However, there's no rush to buy Tesla stock at the moment due to the ongoing decision-making process regarding Musk's compensation.
Tesla plans to propose a “longer-term CEO compensation strategy” to shareholders at the November 2025 annual meeting, likely aiming to clarify Musk’s long-term pay framework beyond this interim award. The final decision on the compensation strategy will be made at the annual shareholder meeting on November 6.
It's important to note that the new stock package for Musk is contingent on him continuing to lead Tesla for another two years. The management and majority shareholder of the publisher Boersenmedien AG, Mr. Bernd Foertsch, has entered into direct and indirect positions in Tesla Inc. financial instruments or related derivatives.
The legal challenges from the previous compensation dispute are still ongoing, as Tesla has appealed the ruling but has since moved its legal headquarters to Texas. The new stock package for Musk, valued around $24–29 billion depending on source, has been described as a "first step, good faith payment" to keep Musk engaged as the legal battle over the 2018 package continues on appeal.
References:
- Tesla's new stock award for Musk explained
- Tesla approves $29 billion stock award for Elon Musk
- Tesla's New Stock Award for Elon Musk: What You Need to Know
Despite the ongoing legal challenges from the previous compensation dispute, Tesla has approved a new stock package worth around $29 billion for CEO Elon Musk, aiming to secure his continued leadership in the finance sector. This new award requires Musk to remain in a senior executive role for the next two years and to hold the shares until 2030, thereby increasing his Tesla stock ownership from around 13% to 15%.
