Engineering giant Tesla greenlights a staggering US$29 billion in stock rewards for Musk amid ongoing legal proceedings
Tesla Approves Massive $27-29 Billion Pay Package for Elon Musk
Tesla has granted Elon Musk a new pay package worth around $27 to $29 billion in restricted stock shares, according to a letter written by Robyn Denholm and Kathleen Wilson-Thompson, members of the board's special committee addressing Musk's compensation.
The award is a replacement for the previously invalidated 2018 compensation package, valued at $55.8 billion. This new package protects Musk’s compensation if Tesla loses ongoing litigation about the original grant.
The grant includes 96 million restricted shares at a strike price of $23.34 per share. These shares vest only if Musk remains CEO or chief of product development/operations for two years after Aug 3, 2025, and Musk cannot sell vested shares for five years post-award.
The deal applies only if Musk and Tesla lose the ongoing appeal in Delaware courts that invalidated the initial 2018 grant. If the appeals court rules in Musk's favor and grants him the full 2018 compensation, he would be required to forfeit the new compensation package.
With this award, Musk’s Tesla stake would be nearly 16%, valuing over $150 billion at current prices. The new shares provide a "floor" in compensation linked directly to the legal outcome, adjusted if any original grants are reinstated.
The new compensation package has raised concerns about Musk’s compensation given his status as the world's richest man. Some investors and governance experts view the new award as a "deep-in-the-money stock option for retention," lacking meaningful performance targets and described as a retention tool rather than an incentive for performance.
Shareholder groups holding millions of Tesla shares have expressed doubts that this massive equity award would motivate Musk to stay actively engaged amid current company sales challenges. The ongoing litigation and re-approval process reflect attempts to balance rewarding Musk while placing limitations (vesting and holding periods) to ensure continued leadership and reduce premature cashing out.
The company states that retaining Elon Musk is more important than ever. The new pay package is considered a first step by Tesla, possibly indicating further developments in Musk's compensation. The distribution is intended to compensate Musk for his future services.
The new compensation package is intended to help prevent a possible ouster by activist shareholders. Musk has filed an appeal against the court's ruling regarding his previous compensation package. The new pay package does not specify the exact monetary value.
[1] Tesla Compensation Committee Letter to Shareholders
[2] Bloomberg News: Tesla Gives Elon Musk $27 Billion Stock Award to Settle Pay Dispute
[3] New York Times: Tesla Gives Elon Musk a $27 Billion Stock Award
- If Musk's appeal against the court's ruling is unsuccessful, the new compensation package, worth approximately $27 to $29 billion in restricted stock shares, will stand for him, as outlined in the Tesla Compensation Committee's letter to shareholders.
- Amid ongoing litigation and concerns from certain investors, Tesla's decision to approve a large financial investment in Elon Musk, totaling around $27 to $29 billion, highlights the company's commitment to retaining his leadership in the face of business challenges and potential intervention from activist shareholders.
