Gold Silver Reports (GSR) – Tesla Inc. shareholders are said to have approved the board’s proposal to grant Chief Executive Officer Elon Musk stock options valued at $2.6 billion, paving the way for him to reap a big windfall if the electric-car maker maintains its growth trajectory over the next decade.
Investors holding a majority of the shares that were voted at Wednesday’s special meeting in Fremont, California, supported the performance award, according to a person familiar who asked not to be identified. The board needed majority approval to make the grant, which likely is the largest one-time compensation deal ever awarded. Tesla had said Musk and his brother Kimbal, who’s a company director, wouldn’t vote their shares.
The award, which won’t vest unless a set of ambitious financial goals are met, has been cheered by some large Tesla investors who said it would help the CEO drive the business forward. Critics, including the two largest proxy advisers, said it was too costly and questioned why Musk, a billionaire who has about half his wealth tied up in company stock, needed more equity to stay motivated.
Stock Spike
Tesla’s shares were up 3.6 percent to $321.86 as of 12:48 p.m. in New York, erasing losses for the year.
Tesla Targets
Musk’s award will pay when Tesla hits pairs of goals, with one tied to market value
Under the new plan, Musk will earn one-12th of the options every time Tesla hits a pair of goals: one tied to its market value and the other linked to either revenue or earnings excluding certain charges. For Musk to get all the options, Tesla would have to become worth $650 billion — more than Facebook Inc. — and produce more revenue than Procter & Gamble Co.
A Tesla spokesman didn’t immediately respond to a request for comment.
Tesla has said in regulatory filings that Musk’s award could yield him more than $50 billion if all goals are achieved. Some large investors have said the package aligns with their interests, signaling they don’t mind if Musk gets wealthier, as long as they also see big returns.
Large shareholders Baillie Gifford & Co. and T. Rowe Price Group Inc. signaled ahead of the vote that they would probably support the package. Spokesmen for both companies didn’t immediately reply to requests for comment. Fidelity, which holds almost 10 percent of Tesla stock, declined to comment. A spokesman for Chinese internet giant Tencent Holdings Ltd., which holds about 5 percent of Tesla, was not immediately available to comment.
Potential Dilution
California State Teachers’ Retirement System, the second-largest pension fund in the U.S., said it did not support the plan, citing concerns about potential dilution and an absence of profitability goals. Large stock awards can be costly for investors in two ways: They can increase a company’s expenses and they dilute the stakes of existing shareholders.
Still, the fund is appreciative of Musk’s “visionary leadership,” Anne Sheehan, director of corporate governance at Calstrs, said in an emailed statement. – Neal Bhai Reports
