Tesla (TSLA) Stock: Musk’s $1 Trillion Pay Plan Wins Shareholder Approval

TLDR

• Tesla shareholders backed Elon Musk’s $1 trillion compensation package with 75% approval at Thursday’s annual meeting in Austin.
• The pay structure includes 12 stock award tranches tied to market cap targets from $2 trillion to $8.5 trillion plus operational goals.
• Musk would receive 423 million additional shares over 10 years, raising his ownership from 13% to 25% if all milestones are achieved.
• First payout triggers at $2 trillion market cap while full compensation requires $8.5 trillion valuation and targets like 20 million vehicle deliveries.
• The package represents $275 million daily in stock value if fully earned, making it the largest executive pay deal ever proposed.

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Tesla shareholders delivered a decisive victory for CEO Elon Musk on Thursday. The $1 trillion compensation package passed with 75% support at the company’s annual meeting in Austin, Texas.

The vote excluded Musk’s existing 15% ownership stake. Shareholders in attendance cheered loudly when results were announced.

The board introduced this compensation plan in September. They recommended approval despite opposition from major proxy advisors Glass Lewis and ISS.

Tesla, Inc., TSLA

The structure centers on performance-based stock grants. Musk receives no traditional salary under the arrangement.

The compensation divides into 12 equal tranches of stock awards. Each tranche unlocks when Tesla achieves specific benchmarks.

Tesla currently holds a market cap of $1.54 trillion. The first payout requires reaching $2 trillion in company valuation.

Climbing To $8.5 Trillion

Nine additional tranches unlock as Tesla’s value increases by $500 billion increments. These payments continue until the company reaches $6.5 trillion.

The final two tranches require $1 trillion jumps each. Tesla must hit $8.5 trillion for Musk to collect the full package.

This means the stock price needs to surge 466% from current levels. The target exceeds Nvidia’s recent $5 trillion record by 70%.

Musk would gain more than 423 million additional shares over the next decade. His ownership would jump from roughly 13% to 25%.

The daily value equals $275 million if all targets are met over 10 years. This dwarfs any previous executive compensation in corporate history.

Earnings targets start at $50 billion in annual adjusted profit. The highest milestone sits at $400 billion annually.

Tesla reported $4.2 billion in adjusted EBITDA during the third quarter. Meeting these profit goals demands exponential growth.

Product Delivery Requirements

The pay plan includes operational targets beyond financial metrics. Tesla must deliver 20 million vehicles over the next decade.

The company has delivered over 8 million vehicles to date. That leaves substantial ground to cover.

Musk must also achieve 10 million active Full Self-Driving subscriptions. The plan doesn’t specify if these must be paid subscriptions or can include trials.

Tesla currently offers FSD Supervised, which requires driver attention. The company plans to develop fully autonomous capabilities.

The package requires delivery of 1 million Optimus humanoid robots. Tesla must also launch 1 million robotaxis in commercial operation.

Musk predicted the humanoid robots could end global poverty. He estimates production costs at $20,000 per unit with car-level pricing.

A separate proposal about investing in Musk’s xAI startup received mixed results. Brandon Ehrhart, Tesla’s general counsel, noted more votes in favor than against but many abstentions.

The company has struggled this year with declining sales and profits in the first half. Reduced government EV support threatens future revenue.

Musk previously suggested he might leave Tesla without this compensation structure. The board noted his concerns about maintaining adequate voting control.

Many milestone-linked products remain in development. This means Musk may never receive full compensation if Tesla doesn’t hit targets.

The pay package increases Musk’s voting power over company decisions. His influence grows while keeping him accountable to shareholders.

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