Tesla’s $1 Trillion Musk Pay Deal Nears Approval Despite Protests
▼ Summary
– ISS recommends Tesla shareholders reject Elon Musk’s proposed compensation plan, which could exceed $1 trillion over the next decade.
– The plan aims to retain Musk and focus his attention on Tesla but lacks mechanisms to ensure he prioritizes Tesla over his other ventures.
– The large grant value may dilute shareholder value and is questioned as unnecessary given Musk’s existing 19.8% ownership stake.
– The proposal would grant Musk over 423.7 million shares in 12 tranches if he meets specific operational and market cap goals.
– Achieving all milestones requires Tesla’s market cap to grow to $8.5 trillion, with the shares valued between $87.8 billion and $104.4 billion by different estimates.
A major advisory firm is urging Tesla shareholders to vote against a proposed compensation package for CEO Elon Musk that could ultimately be worth more than one trillion dollars. Institutional Shareholder Services (ISS), which provides guidance to investors, released a report arguing the plan is excessive and fails to guarantee Musk will dedicate his focus to the electric vehicle maker.
The stated purpose of the pay package is to retain Musk and keep his time and attention on Tesla instead of his other business ventures. However, ISS contends the agreement lacks any binding requirements to ensure his focus remains on Tesla, which it says undermines the entire rationale for the award. The firm expressed concern that the “astronomical grant value” could significantly dilute the holdings of other shareholders.
ISS also questioned whether such a massive award is necessary to align Musk’s interests with the company, pointing out he already holds a substantial 19.8 percent ownership stake. The proposal, set for a shareholder vote on November 6, would grant Musk over 423.7 million additional Tesla shares, potentially increasing his total ownership to 28.8 percent. These shares would be distributed in twelve separate installments as Musk achieves specific performance milestones.
While Tesla has valued the shares at $87.8 billion, ISS calculates their worth at $104.4 billion. Using Tesla’s own more conservative valuation, the ultimate payout for Musk would surpass the $1 trillion mark if the company hits all its ambitious market capitalization targets. The ISS report notes that reaching the final market cap goal of $8.5 trillion would require historic growth of approximately $7.5 trillion from the grant date. This would give Tesla a market value exceeding that of its largest current competitors in the artificial intelligence sector combined.
The performance-based package ties share grants to a combination of operational and financial targets. The initial milestone requires Tesla to deliver 20 million vehicles while simultaneously achieving a $2 trillion market valuation. Subsequent goals are even more ambitious, including securing 10 million Full Self-Driving subscriptions, delivering one million “AI robots,” deploying one million robotaxis into operation, and generating a staggering $400 billion in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).
(Source: Ars Technica)
