Elon Musk Wins $2.6 Billion Pay Package Despite CalSTRS Opposition

24 March, 2018, 14:17 | Author: Rolando Keller
  • FILE In this Feb. 6 2018 file

Only a few investors and markets analysts wondered in recent months why a company such as Tesla would be valued at such a high public price while it continuously fails to reach its targets (1).

A Tesla spokesperson confirmed the result after a shareholder vote on Wednesday.

Tesla says the all-or-nothing package is worth $2.6 billion at current stock values, but that would rise dramatically if Musk meets 12 incremental goals including raising the company's market capitalization tenfold to $650 billion.

The plan is also meant to keep Musk from jumping ship for one of his other many projects in areas such as commercial space and artificial intelligence. "But at some point if there's somebody really spectacular inside or outside the company who could take on that role and who would want to have that title and that role, that would be fine with me, and I would focus on product development, which is design and engineering, which is what I like doing best", he said. The board needed majority approval to make the grant, which likely is the largest one-time compensation deal ever awarded.

Shares in the company rose 3.42 per cent to $321.18 following the news.

For Mr Musk to receive the full award, Tesla's value would have to jump to $650bn.

The Silicon Valley billionaire's compensation package announced in January involves no salary or cash bonus but sets rewards based on Tesla's market value rising to $650 billion (£464 billion) over the next 10 years.

If that comes to pass, it would presumably add a nice boost to Musk's fortune, which Forbes estimates at $20.1 billion.

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A Tesla spokesman didn't immediately respond to a request for comment.

The vote has been seen as a test of whether big investors are prepared to support such a large payout at the founder-led company.

"For each of the 12 tranches that is achieved, Elon will vest in stock options that correspond to 1% of Tesla's current total outstanding shares (1% of that amount is approximately 1.69 million shares)".

Large shareholders including Baillie Gifford & Co. and T. Rowe Price Group Inc. signaled ahead of the vote that they would probably support the package. But a smaller investor, the California State Teachers' Retirement System (CalSTRS), said it planned to vote no.

Large stock awards can be costly for investors in two ways: They increase a company's expenses and they dilute the stakes of existing shareholders.

"Given the size of the award, we believe the potential dilution to shareholders is just too great", CalSTRS director of corporate governance Anne Sheehan said in response to an AFP inquiry.

Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management in Santa Monica, California, which holds Tesla shares, said he voted yes.

Tesla has since made another acquisition, Perbix, a factory automation company based in Minnesota, and it has been growing its overall operations to now over 37,000 employees worldwide - a lot of them in the US.

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