- Title: "A jaw dropper" - judge voids Elon Musk's $56 billion Tesla pay package
- Date: 31st January 2024
- Summary: NEW YORK, NEW YORK, UNITED STATES (JANUARY 31, 2024) (REUTERS) (SOUNDBITE) (English) DAN IVES, TECHNOLOGY ANALYST AT WEDBUSH SECURITIES, SAYING: "This is a jaw dropper that Delaware ruled against Musk and the board. The Street thought that there was no way this was going to happen, and now it adds uncertainty. I think it's unprecedented. And it really starts a Game of Thrones battle with Musk-Tesla versus the Delaware courts." WHITE FLASH (SOUNDBITE) (English) DAN IVES, TECHNOLOGY ANALYST AT WEDBUSH SECURITIES, SAYING: "Well the board of Tesla has a few options. I mean clearly they can appeal, but they could also supersede, do a new agreement retroactively, essentially, going back to the 2018 comp package, get shareholder approval at the upcoming meeting. That would supersede it. The other thing they could do is a new comp package that would basically be all-inclusive of the '18 as well as the new ones, but this is unprecedented territory. I think it's a shock that it happened, and it comes at a very tenuous time for Musk as well as the Tesla board." WHITE FLASH (SOUNDBITE) (English) DAN IVES, TECHNOLOGY ANALYST AT WEDBUSH SECURITIES, SAYING: "I think it's a fork in the road because Musk is Tesla, Tesla is Musk. It needs to make sure that Musk stays a big part of Tesla, especially through AI in the coming years. But this throws a wrench in it. Remember the reason Musk became the richest person in the world was because of this comp package." WHITE FLASH (SOUNDBITE) (English) DAN IVES, TECHNOLOGY ANALYST AT WEDBUSH SECURITIES, SAYING: "Look, I think they definitely had a bull's eye on their back in terms of Musk and Tesla, it's obviously unprecedented. But Musk has created hundreds of billions of dollars of value. The question is what comp should he get? You know, this definitely opens up Pandora's box in terms of excessive compensation with CEOs. But it's really going to be back to the drawing board for the board, and I would expect a response, pretty strong one, by the board, probably in the next 24 hours." WHITE FLASH (SOUNDBITE) (English) DAN IVES, TECHNOLOGY ANALYST AT WEDBUSH SECURITIES, SAYING: "I think Wall Street's frustrated. Its uncertainty at a time where this was approved by 80% of shareholders. No one thought, almost six years later, that we'd be dealing with this. And it just adds to some of the challenges that's happening in the Tesla story right now." WHITE FLASH (SOUNDBITE) (English) DAN IVES, TECHNOLOGY ANALYST AT WEDBUSH SECURITIES, SAYING: "I think every board's going to be closely watching this, and I think from a comp perspective, making sure they have all their Is dotted, Ts crossed. Could companies ultimately leave Delaware? I mean that's some that could of course happen. And I think this really creates what could be a firestorm. But for now it's Tesla and Musk that are front and center." WHITE FLASH (SOUNDBITE) (English) DAN IVES, TECHNOLOGY ANALYST AT WEDBUSH SECURITIES, SAYING: "Look, I think Musk is, in my opinion, probably the most valuable individual for any company, maybe around the world. And I think that's what unique about Musk we've seen with SpaceX acts, of course with Tesla. The value he creates is multiples of what he's paid. And it's rare that a company gets into a situation called key man risk, where he has become Tesla, Tesla has become him. And with that comes comp packages that might outsize the typical CEO." WHITE FLASH (SOUNDBITE) (English) DAN IVES, TECHNOLOGY ANALYST AT WEDBUSH SECURITIES, SAYING: "I mean, for us, it's definitely a hand-holding through this uncertainty. I don't think it changes the story. The only way it changes the story is that this is a catalyst or a straw that broke the camel's back to Musk, you know, ultimately distancing himself or maybe starting to do more of these AI ventures outside of Tesla. That would be the only way that this has more pronounced impact. But I think it's a 'get out the popcorn' moment and I'd expect a pretty strong response from Musk and Tesla."
- Embargoed: 14th February 2024 19:33
- Keywords: Delaware Elon Musk Tesla compensation court ruling
- Location: NEW YORK, NEW YORK, UNITED STATES
- City: NEW YORK, NEW YORK, UNITED STATES
- Country: US
- Topics: Crime/Law/Justice,Judicial Process/Court Cases/Court Decisions,North America
- Reuters ID: LVA001678531012024RP1
- Aspect Ratio: 16:9
- Story Text:A technology analyst at a Wall Street brokerage firm said a Delaware judge's decision to toss out Elon Musk's record-breaking $56 billion Tesla pay package was "a jaw dropper" for investors.
"The (Wall) Street thought that there was no way this was going to happen, and now it adds uncertainty. I think it's unprecedented. And it really starts a Game of Thrones battle with Musk-Tesla versus the Delaware courts," analyst Dan Ives told Reuters on Wednesday (January 31).
The ruling, which can be appealed, nullifies the largest pay package in corporate America. The judge found the share-based compensation was negotiated by directors who appeared beholden to Musk, currently ranked by Forbes magazine as the world's richest person.
Ives said the board had a few options.
"They can appeal, but they could also supersede, do a new agreement retroactively, essentially, going back to the 2018 comp package, get shareholder approval at the upcoming meeting. That would supersede it. The other thing they could do is a new comp package that would basically be all-inclusive of the '18 as well as the new ones," he said.
Shares of Tesla dropped about 2% in premarket trade, and some investors seized on the ruling in hopes it might prompt Tesla to overhaul its governance.
Ives said Musk's position and the value he brings to Tesla is unique in corporate America.
"The value he creates is multiples of what he's paid. And it's rare that a company gets into a situation called key man risk, where he has become Tesla, Tesla has become him. And with that comes comp packages that might outsize the typical CEO."
Tesla's 10-year pay agreement with Musk reached in 2018 would be worth around $51 billion at Tuesday's closing price for Tesla stock, accounting for the cost to Musk to exercise the options.
That would be about a quarter of his $210.6 billion fortune, as calculated by Forbes magazine, which currently ranks about $2 billion ahead of LVMH CEO Bernard Arnault of France and his family.
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