Musk’s $29 Billion Stock Package Linked to Court Battle Outcome

This article is not meant as investment advice. The author holds no stakes in any of the companies mentioned.

Elon Musk recently secured a substantial victory, as Tesla has awarded him a new stock compensation package valued at $29 billion. This development follows the court’s rejection of his prior $50 billion pay package, which had prompted Musk to move Tesla’s headquarters from Delaware to Texas. According to Tesla’s 8-K SEC filing, the company’s board hopes that this new incentive will encourage Musk to maintain his focus on Tesla amidst his engagements in various sectors, such as artificial intelligence and space exploration.

Elongated Stock Option Grant Linked to Court Outcomes

Musk’s initial stock award, approved in 2018, had a staggering valuation of $55.8 billion, spread over a decade. At that time, Tesla’s board argued that this compensation was crucial to prevent Musk from diverting his attention to other business interests. However, this pay package faced significant hurdles when shareholder Richard Tornetta filed a lawsuit, asserting that Musk and the Tesla board had breached fiduciary responsibilities during the award process.

A significant setback occurred in early 2024 when a judge annulled Musk’s compensation package, deeming it excessively high and criticizing the accuracy of proxy statements provided to shareholders. In the aftermath, Musk chose to relocate Tesla from Delaware to Texas. Later that year, Tesla’s shareholders reaffirmed the pay package with a 77% approval.

The court’s decision raised concerns about whether Musk’s substantial stake in Tesla exerted undue influence on shareholders, prompting speculation about whether they voted in favor of the package due to Musk’s celebrity executive status or genuine approval of the compensation structure.

2025 CEO Interim Award terms: shares, vesting, price, holding rules, and conditions summary.

While the legal proceedings surrounding the original stock award continue, Tesla has introduced a new stock package for Musk, amounting to $29 billion. This latest grant will vest over two years and is contingent upon Musk serving as Tesla’s CEO or playing a pivotal role in product development.

Importantly, the new award is also tied to the outcome of ongoing legal matters. Tesla’s SEC filing asserts that this award “will be immediately forfeited and returned to the Company” if a definitive, non-appealable ruling from Delaware’s courts regarding the original case is made prior to vesting. Should Musk attain the right to exercise the performance-based stock option from the 2018 CEO Award, the new package would be voided.

Additionally, the agreement includes a “no double-dip”clause, preventing Musk from accruing more shares than those awarded in the 2018 package, in the event of a favorable ruling. Should the court recognize the 2018 award after the 2025 package’s vesting, Musk may need to return any excess shares to Tesla, and he retains the option to relinquish the 2018 award under this clause.

Source & Images