Despite Tesla’s stock market value falling 52% since November 2021, CEO Elon Musk received support for his $48 billion pay package at a recent shareholder meeting. However, the Delaware ruling that initially struck down Musk’s pay package still stands and further litigation is anticipated. The vote of support from shareholders does not change Tesla’s disappointing performance and prospects, particularly Musk’s strategy for growth.
The reaffirmed pay award for Musk at the shareholder meeting was in response to a judge in Delaware ruling against Musk’s 2018 pay package. This package included stock options that would be granted if certain benchmarks were achieved, ultimately boosting the company’s stock value. However, the ruling found the package to be excessive due to conflicts of interest within Tesla’s board members. This, in addition to Tesla’s lower growth expectations and declining stock performance, has led to uncertainty surrounding Musk’s pay package.
Despite Tesla’s recent stock increase following the shareholder vote, it remains unclear whether Musk’s pay package will be reinstated. Tesla intends to appeal the Delaware court’s decision and is hopeful that shareholder ratification will address the concerns raised by the court. The company may also consider utilizing a provision of Delaware law to rectify the situation. However, it is uncertain how these legal maneuvers will impact Musk’s pay package in the future.
Tesla’s stock rise after the shareholder vote may reflect investor confidence in Musk’s commitment to increasing the company’s stock price. However, some investors question the validity of using earnings per share as a valuation benchmark given the potential implications of Musk’s stock options being canceled. Musk’s remarks at the annual general meeting about cutting costs also raise concerns about his leadership in a competitive market. Despite Musk’s vision for Tesla’s future, some analysts view the stock as overvalued, suggesting that investing in a low-cost index fund may be a safer option for investors.
Wall Street analysts maintain an average price target for Tesla stock that is slightly lower than its current value, signaling that the stock may be overvalued. While the shareholder vote in favor of Musk’s pay may boost his morale, challenges remain in terms of Tesla’s performance and prospects. Musk’s ambitious goals for the company, including self-driving robotaxis and humanoid robots, are seen as lofty by some investors and analysts. Ultimately, the future of Tesla’s stock and Musk’s pay package hinges on the company’s ability to navigate legal challenges, improve performance, and restore investor confidence.
