Elon Musk, the CEO of Tesla, received approval for an extraordinary pay package potentially valued at nearly $1 trillion (£760 billion) from the company’s shareholders. During the annual general meeting held on Thursday, an overwhelming 75% of votes supported the deal, which was met with enthusiastic applause from attendees.
This landmark agreement requires Musk to significantly elevate Tesla’s market valuation over the next decade. If he successfully achieves various performance milestones, he stands to gain hundreds of millions of new shares. While the enormity of this compensation has sparked criticism, the Tesla board emphasized that Musk’s departure could pose a significant risk to the company.
Future goals for Tesla
Following the announcement, Musk appeared on stage in Austin, Texas, where he celebrated with a dance amidst shouts of his name. He remarked,
“What we’re about to embark upon is not merely a new chapter of the future of Tesla, but a whole new book.”
He further added,
“Other shareholder meetings are snoozefests but ours are bangers. Look at this. This is sick.”
To maximize his potential payout, Musk must boost Tesla’s market value from around $1.4 trillion to $8.5 trillion and deploy one million self-driving Robotaxi vehicles into operation. However, some analysts believe Musk may be shifting focus towards the Optimus robot, leading to concerns that he may be neglecting the core electric vehicle segment.
Gene Munster, managing partner at Deepwater Asset Management, commented on Musk’s emphasis on the new robot initiative, stating,
“Let it sink in where Musk’s head is at.”
He also pointed out that there was no mention of critical projects like full self-driving (FSD) and Robotaxi developments during Musk’s initial comments.
Challenges ahead for Tesla
In his subsequent remarks, Musk did mention the FSD program, indicating that Tesla is nearing readiness to allow drivers to operate vehicles while distracted. The safety of this feature is currently under scrutiny by US regulators due to several incidents involving Tesla vehicles.
Following the vote, Tesla’s shares saw a modest increase in after-hours trading, reflecting a more than 62% rise over the past six months. Nonetheless, the company’s sales have experienced a downturn since Musk’s association with former President Donald Trump, a relationship that has since deteriorated.
Ross Gerber, a Tesla shareholder and CEO of Gerber Kawasaki, characterized Musk’s pay deal as “another notch in the unbelievable things that you see in business.” He voiced concerns regarding the firm’s financial struggles, while some institutional investors, including Norway’s sovereign wealth fund and the California Public Employees’ Retirement System (CalPERS), rejected the new pay deal, leaving Musk reliant on retail investors.
Despite these challenges, analysts such as Dan Ives from Wedbush Securities continue to champion Musk’s leadership, suggesting that an AI-driven valuation for Tesla is on the horizon. Meanwhile, Ann Lipton, a law professor, noted that while Musk has previously met ambitious goals ahead of schedule, there are uncertainties regarding the feasibility of his future targets.
As Tesla navigates its complex landscape, the implications of Musk’s new compensation structure will likely influence the company’s direction and market perception for years to come.