Tesla gives Elon Musk $46 billion award to stop him from leaving
The new agreement includes 96 million shares of the automaker that will vest if Musk continues to serve in the top post for another two years, the company said in a regulatory filing. The restricted stock has an exercise price of $US23.34, equal to the price in the prior compensation plan.
Shares of Tesla rose as much as 3.1 per cent to $US312.12 in New York before paring the gains to around 2 per cent in late trade. The company's stock was down 25 per cent this year as of Friday's close, compared with a 6 per cent rise in the S&P 500.
The move underscores Musk's grip on the company, even as it struggles with falling electric vehicle sales and a slumping stock price. The world's richest person has said he wants a greater stake in Tesla as he reorients it around futuristic pursuits including artificial intelligence and driverless vehicles.
The board emphasised the importance of retaining Musk, saying in a shareholder letter released Monday that the award was a first step 'good faith' payment. 'After all, a 'deal is a deal.'' It said it's working on a longer-term CEO compensation strategy, which will be put to a vote at the EV maker's November 6 annual meeting.
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The decision was met with early praise by some investors and analysts. It 'removes an overhang on the stock' and likely ensures Musk remains as CEO for a number of years, Wedbush analyst Dan Ives said in a note. 'Musk remains Tesla's big asset and this comp issue has been a constant concern of shareholders.'
The value of the new award, based on the latest trading price, doesn't take into account that Musk has to pay $US23.34 per share, or $US2.24 billion in total, to collect it.
The per-share purchase price — akin to a stock option's exercise price — echoes back to when companies would hand out options to executives but set their grant date to an earlier point in time when the share price was lower. This meant the securities were immediately in the money. Backdating isn't illegal, but the practice has become much less common after it was a feature in a number of corporate scandals in the 2000s.
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