When a company’s board approves a significant pay package, look out below. For Tesla (TSLA), the reaction on the share price is the opposite.
TSLA stock rose by 3.6% to close at $350.81 after the board proposed a $1 trillion pay package for CEO Elon Musk. Shareholders will vote on November 6 to approve the issuance of 423 million shares.
Stock markets assigned a high value to securing Musk as Tesla’s CEO. Moreover, the pay must meet several performance targets. Tesla must hold a $2 trillion market capitalization, where each tranche of $500 billion in market cap unlocks the next tranche. The firm needs to sell 10 million active full self-driving subscriptions, deliver one million Optimus robots, and have a million Robotaxis in operation.
Tesla also needs to sell 20 million vehicles. Unfortunately, the quarterly EV sales declines suggest that Musk will not meet the performance targets.
The company still has a damaged brand. The CEO’s involvement in politics could potentially hurt the brand value permanently. More importantly, the current government is winding down EV tax credits. Without $7,500 in credits, sales in the U.S. will continue to fall.
In Sweden, Tesla registrations fell by 84%, to 210 vehicles, in August. The sales downtrend is spreading globally.
Musk has an uphill battle from here to earn the $1 trillion payout.
