What do you give a man who already can buy anything? How about US$1 trillion?<\/p>\n
That\u2019s what the Tesla board of directors have decided to offer CEO Elon Musk. They unveiled a new pay package Friday for shareholders to consider that could give Musk up to 423.7 million additional shares of Tesla stock in the next decade.<\/p>\n
Those potential shares might \u201conly\u201d be worth $148.7 billion as of Friday\u2019s closing price. But if Tesla shares appreciate as much as the pay package forecasts, they would be worth close to $1 trillion once Tesla hits certain milestones: He gets all of those shares only if Tesla becomes worth $8.5 trillion, about eight times as much as it is today, and twice as much as any company on the planet has ever been worth.<\/p>\n
The company\u2019s board says in its filing to shareholders that it needs to offer Musk a historic pay package or risk losing the leader who has become synonymous \u2013 for better or worse \u2013 with the Tesla brand.<\/p>\n
The board said that during the negotiations on the pay package, \u201cMusk also raised the possibility that he may pursue other interests that may afford him greater influence if he did not receive such assurances.\u201d<\/p>\n
The board said it \u201cbelieves that Mr. Musk singularly possesses the leadership characteristics necessary to transform Tesla and realize its long-term mission at an unparalleled level.\u201d<\/p>\n
But it\u2019s also been clear that the company was not pleased that Musk has been viewing his Tesla gig as a part-time job. He has focused much of his attention on some of his other privately held companies, such rocket company SpaceX and its satellite internet offering Starlink and his artificial intelligence firm xAI, which now owns his platform X, formerly known as Twitter, which Musk bought for $44 billion of his own money in 2022. And Musk has become more involved in politics, including plans to start a third party.<\/p>\n
Earlier this year, when Musk was still leading the Department of Government Efficiency, or DOGE, the board began a search for a possible successor for Musk, according to the Wall Street Journal. Both board chair Robyn Denholm and Musk denied the report. Soon after the reported search began, Musk announced he would be leaving DOGE to spend most of his time again running Tesla.<\/p>\n
\u201cThe simple message the board is sending to Elon: \u2018We want your attention on Tesla,\u2019\u201d wrote Gene Munster, managing partner at Deepwater Asset Management in a note Friday. \u201cImplicit in that message is the promise that he\u2019ll have the control he\u2019s been seeking (a 25% stake) and that it will be worth his time.\u201d<\/p>\n
Musk demands control<\/p>\n
Musk has made clear control of Tesla is vitally important to him. He said in a post on X in January 2024 that he needs to control at least 25 per cent of Tesla shares.<\/p>\n
\u201cI am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can\u2019t be overturned,\u201d Musk wrote in a post on X. \u201cUnless that is the case, I would prefer to build products outside of Tesla.\u201d<\/p>\n
That need for control is what\u2019s behind this pay package, said Ross Gerber, CEO of Gerber Kawasaki, an investment firm and one of the early investors in Tesla.<\/p>\n
\u201cThis is all about Musk being scared about being kicked out of Tesla because he only owns 13 per cent,\u201d said Gerber, who has sold almost his entire stake in Tesla.<\/p>\n
Munster and other Tesla bulls believe he\u2019s right that AI, autonomous vehicles, robotaxis and humanoid robots are the future that will lift Tesla to the $8.5 billion target price, and adjusted operating profits of $400 billion that would be 20 times greater than Tesla\u2019s previous record profit.<\/p>\n
\u201cWe are still just scratching the surface of physical AI: current use cases are almost comical, limited to nascent robotaxi trials by Waymo and Tesla,\u201d Munster wrote Friday. \u201cEventually, physical AI will impact anything that moves, representing a market potential that\u2019s hard for me to fathom.\u201d<\/p>\n
Ambitious targets<\/p>\n
But critics of Musk and Tesla predict that Musk will fail to deliver on that potential, just as he failed to meet many previous target dates for the company to produce full self-driving vehicles and robotaxis. They say that Musk\u2019s real value to Tesla is his ability to convince Wall Street of the bright future that lays ahead, despite a trail of broken promises.<\/p>\n
\u201cElon Musk has been saying since 2014 \u2018we will have a fully autonomous car next year.\u2019 It hasn\u2019t happened, but that promise has been valued in the billions by Wall Street,\u201d said analyst Gordon Johnson, one of the harsher critics of Tesla. \u201cElon Musk is a master manipulator. He\u2019s been able to keep the stock elevated. The reason the board is paying him is he\u2019s willing to say things that other CEOs aren\u2019t willing to say or get away with.\u201d<\/p>\n
Despite that track record, there\u2019s a good chance that Tesla investors will approve the potentially massive pay package. They have regularly approved his pay packages in the past, even reconfirming a pay package in 2024 that a Delaware judge had thrown out as being unfair to shareholders and the company.<\/p>\n
They will see that Musk won\u2019t get anything from this new package unless the company, and their own holdings, greatly increase in value. The first target that Musk and Tesla will have to hit before he sees any shares will be $2 trillion, or nearly twice its current value.<\/p>\n
\u201cThey\u2019ll think \u2018I kind of having nothing to lose,\u2019\u201d Gerber said. He said their thinking will be along the lines of: \u201cThe goals are so high that if he makes them, I\u2019ll make a lot of money. So who cares if he gets $1 trillion.\u201d<\/p>\n
\u201cBut if you actually think about it, it\u2019s absurd,\u201d he said.<\/p>\n
Chris Isidore, CNN<\/p>\n","protected":false},"excerpt":{"rendered":"What do you give a man who already can buy anything? How about US$1 trillion? That\u2019s what the…\n","protected":false},"author":2,"featured_media":126674,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[712,45,49,48],"class_list":{"0":"post-128689","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-apple-news","9":"tag-business","10":"tag-ca","11":"tag-canada"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/128689","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=128689"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/128689\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/126674"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=128689"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=128689"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=128689"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}