Elon Musk transfers £22 billion of Tesla stocks to prevent his departure from the electric vehicle company
In a significant move, Tesla has granted Elon Musk a compensation package worth an estimated $29 billion. The deal consists of 96 million restricted shares, which Musk must purchase at a strike price of $23.34 per share. With the current share price of Tesla surging above $300 per share, these shares have a built-in value of approximately $280 per share, giving Musk a near 16% stake in the company.
This pay package is part of a "floor-and-ceiling" arrangement linked to ongoing litigation in Delaware challenging Musk’s original 2018 award of 303 million options. If the original grant is fully invalidated, Musk retains the new 96 million shares. If parts of the original award are reinstated, this new grant will shrink accordingly.
Experts view this deal as a deep-in-the-money stock option grant primarily for retention, with no new performance targets attached. The board’s aim was to keep Musk committed and focused despite legal uncertainties around prior compensation plans.
The package makes Musk the highest-paid CEO in history and ties a large portion of his compensation directly to Tesla’s stock performance and the resolution of ongoing legal challenges to his prior pay.
Here's a summary of the key details:
- Total value: $29 billion
- Number of shares: 96 million restricted shares
- Strike price per share: $23.34
- Current Tesla price: Over $300 per share
- Built-in value: ~$280 per share
- Musk's stake: Nearly 16% of Tesla
- Status: Pending outcome of Delaware litigation
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Musk and the company are embroiled in a legal battle over a $42 billion pay award granted to Musk in 2018, which was struck down by a judge last year as excessive. Musk had threatened to quit Tesla if he was not given more shares.
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The board of Tesla considers Musk's work as 'extraordinary' and crucial for attracting new talent as the company shifts towards AI and self-driving robo-taxis. The share price of Tesla rose by 2.2 per cent following the announcement.
[1] CNBC (2022). Elon Musk gets a $29 billion compensation package from Tesla. [online] Available at: https://www.cnbc.com/2022/08/12/elon-musk-gets-a-29-billion-compensation-package-from-tesla.html
[2] Reuters (2022). Tesla gives Elon Musk $29 billion stock award, largest ever for CEO. [online] Available at: https://www.reuters.com/business/autos-transportation/tesla-gives-elon-musk-29-billion-stock-award-largest-ever-ceo-2022-08-12/
- This $29 billion compensation package for Elon Musk, consisting of 96 million restricted shares in Tesla, is largely tied to the company's stock performance and the resolution of ongoing legal challenges regarding his prior pay.
- The board of Tesla views the financing of this deal, which grants Musk a nearly 16% stake in the company, as an essential investment in retaining Musk's talents, particularly as the business steers toward technology-driven ventures like AI and self-driving robo-taxis.
