Tesla Gives Musk $30 Billion Award, Saying ‘Deal Is a Deal’

Tesla Inc. approved an interim stock award worth about $30 billion for Chief Executive Officer Elon Musk, a massive payout meant to keep the billionaire’s attention on the automaker as a legal fight over a 2018 pay package drags on.

The new agreement includes 96 million shares of the automaker that will vest if Musk continues to serve in the top post for another two years, the company said Monday in a regulatory filing. The restricted stock has an exercise price of $23.34, equal to the price in the prior compensation plan.

The move underscores Musk’s grip on the company, even as it struggles with falling electric vehicle sales and a slumping stock price. The world’s richest person has said he wants a greater stake in Tesla as he reorients it around futuristic pursuits including artificial intelligence and driverless vehicles.

Bloomberg's Steve Man reports.

The board emphasized the importance of retaining Musk, saying in a shareholder letter released Monday that the award was a first step “good faith” payment. “After all, a ‘deal is a deal.’” It said it’s working on a longer-term CEO compensation strategy, which will be put to a vote at the EV maker’s Nov. 6 annual meeting.

The decision was met with early praise by some investors and analysts. It “removes an overhang on the stock” and likely ensures Musk remains as CEO for a number of years, Wedbush analyst Dan Ives said in a note. “Musk remains Tesla’s big asset and this comp issue has been a constant concern of shareholders.”

The value of the new award, based on the latest trading price, doesn’t take into account that Musk has to pay $23.34 per share, or $2.24 billion in total, to collect it.

The per-share purchase price — akin to a stock option’s exercise price — echoes back to when companies would hand out options to executives but set their grant date to an earlier point in time when the share price was lower. This meant the securities were immediately in the money. Backdating isn’t illegal, but the practice has become much less common after it was a feature in a number of corporate scandals in the 2000s.

Moonshot Award

Tesla investors in 2018 voted to award Musk a “moonshot” package of stock options that vested upon meeting certain milestones. The unprecedented agreement was initially worth $2.6 billion and spiked to $56 billion by the time a Delaware court blocked it in early 2024. Plunging and soaring with the company’s fortunes, it has been valued in excess of $100 billion, according to the Bloomberg Billionaires Index.

That pay package was voided after a shareholder lawsuit. The decision is being appealed, but could still take months to be resolved.

Musk reincorporated the automaker in Texas last year, citing the court decision as part of the reason for leaving Delaware. A special board committee had been exploring ways to offer Musk a new compensation agreement in Texas, which will govern this pay package. The committee consists of two people: Chair Robyn Denholm and board member Kathleen Wilson-Thompson.

Amid the ongoing court fight over Musk’s original pay package, Tesla has taken steps to ward off future legal challenges to attempts to compensate its CEO. In Texas, the business-friendly ethos of Republican leaders has resulted in new regulations and protections for companies based in the state. Among those: a new law that allows businesses to impose limits on which investors can challenge a company’s actions in court.

In May, Tesla capitalized on the new law and updated its corporate bylaws to require investors to own at least 3% of the company’s shares in order to “institute or maintain a derivative proceeding.”

Inflection Point

Since it looked like the legal challenges would drag on, the board said it needed to act to retain Musk “against the backdrop of the ever-intensifying AI talent war and Tesla’s position at a critical inflection point.”

The award requires Musk to serve continuously in a senior leadership role at Tesla during the two-year vesting term and that he hold the shares for five years from the grant date

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