Tesla said on Monday it has granted Elon Musk a new interim stock award aimed at retaining the chief executive and incentivizing his continued leadership amid a prolonged legal dispute over his 2018 pay package.
The electric vehicle maker announced the decision in a letter to shareholders on Monday, describing the award as “a first step” in compensating Musk for what the board called his “extraordinary work at Tesla.”
Reacting to the announcement, long-time Tesla bull and Wedbush analyst Dan Ives said the compensation package to Musk “removes an overhang.”
“This should solidify Musk as CEO for Tesla at least until 2030 in our view,” he added. Helps resolve some of the Delaware comp soap opera that has been a cloud over the name.”
The new grant was recommended by a special committee of the board and unanimously approved by the board of directors, with Musk and his brother Kimbal recusing themselves.
The interim award consists of 96 million restricted shares, equivalent to roughly one-third of the now-contested 2018 CEO Performance Award.
These shares will vest over two years, contingent on Musk maintaining a senior leadership role at Tesla and paying a purchase price of $23.34 per share, the same split-adjusted strike price as the 2018 package.
“To recognize what Elon has accomplished and the extraordinary value he delivered to Tesla and our shareholders, we believe we must take action to honor the bargain that was struck in 2018,” the letter read. “After all, ‘a deal is a deal.’”
Tesla emphasized that the new award will not result in double compensation if the Delaware Supreme Court ultimately reinstates the 2018 package.
“To put it simply, there cannot be any ‘double dip.’ Elon will not be able to keep this new award in addition to the options he will be awarded under the 2018 CEO Performance Award should the courts rule in our favor.”
The interim award also includes a five-year mandatory holding period from the grant date, except for sales needed to cover taxes or purchase costs.
The company noted it would use “an orderly disposition in coordination with Tesla” for any such sales. A pledging allowance will also be provided to facilitate tax payments or the purchase price.
The move comes as Tesla awaits a ruling from the Delaware Supreme Court over the fate of the $56 billion 2018 award, which was voided by a Delaware Chancery Court judge who found the process tainted by conflicts of interest and inadequate disclosure.
“Delaware litigation continues to loom over us after seven years,” the shareholder letter stated. “Despite delivering such extraordinary returns, that award continues to be in legal limbo despite two separate shareholder votes supporting it by large margins.”
The company argued that Musk’s leadership has been pivotal to Tesla’s transformation and value creation, noting that the 2018 award corresponded to a $2.3 billion compensation charge and $735 billion increase in Tesla’s market capitalization.
“Rewarding Elon for what he has done and continues to do for Tesla is the right thing to do,” the company said.
The board also cited increasing competition for artificial intelligence talent and Musk’s broad portfolio of other ventures — including xAI, SpaceX, Neuralink, X, and The Boring Company — as key reasons for needing to reaffirm Musk’s incentive to stay.
“The war for AI talent is intensifying,” the letter said. “Even among this group of highly talented individuals, no one matches Elon’s remarkable combination of leadership experience, technical expertise, and, arguably most importantly, decades-long proven track record of building the most revolutionary and profitable businesses.”
“We are confident that this award will incentivize Elon to remain at Tesla and focus his unmatched leadership abilities on further creating shareholder value,” the committee said.
Musk, in a post last week on X, said: “Just fyi I don’t have personal loans at this time against Tesla stock. Also, the taxes on the options are ~45%, so net gain in voting control is more like 4%. It is worrying in that I don’t want to build millions of robots and then potentially be ousted by activists and unable to ensure that public safety remains of paramount importance.”
The board acknowledged shareholder concerns over Musk’s time commitments and voting control, saying: “From those communications, we know that one of your top concerns is keeping Elon’s energies focused on Tesla. This award is a critical first step toward achieving that goal.”
The special committee — composed of Robyn Denholm and Kathleen Wilson-Thompson — said it continues to work on a longer-term CEO compensation strategy that it plans to put to a shareholder vote at Tesla’s November 6 annual meeting.
“We believe this is a vital consideration, and we used the tools currently available to us—our existing equity incentive plan—to grant this award,” they wrote. “Still, while our work remains ongoing, we feel it is important to communicate directly and transparently with you all.”
