Tesla’s board has approved the award of $29bn (£22bn) worth of shares to its chief executive, Elon Musk, after a US court ruled against a previous pay deal for the world’s richest person.
Musk will pay $2bn to buy 96m shares in the electric carmaker at the same price per share as a 10-year pay package agreed in 2018, which is stuck in legal limbo awaiting a court date for an appeal. The award was based on a recommendation from a “special committee” of the board.
The announcement in a financial filing was accompanied by a shareholder letter from two members of the committee, Robyn Denholm, Tesla’s chair, and Kathleen Wilson-Thompson.
It described the award as a “good faith” payment to Musk after the previous pay deal, worth $56bn, was rescinded in 2024 by a judge in Delaware, where the company was incorporated until June that year.
“To recognise what Elon has accomplished and the extraordinary value he delivered to Tesla and our shareholders, we believe we must take action to honour the bargain that was struck in 2018,” the directors wrote. “After all, ‘a deal is a deal’.”
Denholm and Wilson-Thompson said they had reviewed investors’ letters and posts on X – the social media network owned by Musk – and acknowledged concerns about his focus on his job.
“From those communications, we know that one of your top concerns is keeping Elon’s energies focused on Tesla,” they wrote. “This award is a critical first step toward achieving that goal.”
As well as running Tesla, Musk also owns the SpaceX rocket company, the social media platform X, the artificial intelligence company xAI and the brain implant business Neuralink. He has also made forays into Republican politics, damaging the Tesla brand and sales and raising concerns among shareholders.
Dan Ives, an analyst at Wedbush Securities and one of the most prominent voices of concern about Musk’s political travails, said the award would remove an overhang – a surplus of availability – on Tesla shares, increasing prices.
“Musk remains Tesla’s big asset,” Ives said.
The award is worth about $29bn based on Friday’s closing share price. Musk is worth $350bn, according to the Bloomberg billionaires index.
Over the past year, Musk has become embroiled in US politics and a political relationship with Donald Trump that turned toxic after the president entered the White House for the second time, a feat assisted by the Tesla chief executive’s financial and personal support.
The furore put off left-leaning Tesla buyers inside and outside the US, though competition in the electric car market has also affected sales.
A survey from the research firm S&P Global Mobility shared with Reuters showed that Tesla’s customer loyalty has plunged since Musk endorsed Trump. It found 49.9% of Tesla-owning households in the market for a new car bought another Tesla last March. This was just below the industry average, but was down from 73% in June 2024. It edged back up to 57.4% in May this year.
after newsletter promotion
Tom Libby, an S&P analyst, said the fall was “unprecedented”, adding: “I’ve never seen this rapid a decline in such a short period of time.”
Musk is Tesla’s largest shareholder, and the new shares will take his stake from 13% to about 15%. He has said he wants greater control over the company to avoid being ousted by “activist shareholders”. The company is shifting its focus to robotaxis and humanoid robots, in a move that positions Tesla more as an artificial intelligence and robotics firm than a carmaker.
“While we recognise Elon’s business ventures, interests and other potential demands on his time and attention are extensive and wide-ranging … we are confident that this award will incentivise Elon to remain at Tesla,” wrote the directors.
The award is designed to increase gradually Musk’s voting power, something he and shareholders had consistently said was key to keeping him focused on Tesla’s mission, the directors added.
If the 2018 package is reinstated in full following an appeal to the Delaware courts, the new package will be forfeited.
Tesla shares, which have fallen nearly 20% so far this year, rose more than 3% in early trading.
Source link