Tesla has awarded CEO Elon Musk 96 million new shares valued at roughly $29 billion, in a bid to retain the billionaire executive as he challenges a court decision that struck down his previous compensation package as unfair to shareholders.
In 2024, a Delaware court voided Musk's 2018 compensation package, valued at over $50 billion, citing that the Tesla board's approval process was flawed and unfair to shareholders.
Musk kicked off an appeal in March against the order, claiming a lower court judge made multiple legal errors in rescinding the record compensation. Earlier this year, Tesla said its board had formed a special committee to consider some compensation matters involving Musk, without disclosing details.
Tesla is at a turning point as Musk, its largest shareholder with a 13% stake, shifts focus from a promised affordable EV platform to robotaxis and humanoid robots, positioning the company more as an AI and robotics firm than an automaker.
The new award is designed to gradually boost Musk's voting power, something he and shareholders have consistently said was key to keeping him focused on Tesla's mission, the special committee said in the filing.
"While we recognize Elon's business ventures, interests and other potential demands on his time and attention are extensive and wide-ranging ... we are confident that this award will incentivize Elon to remain at Tesla," the committee said in a regulatory filing on Monday.
It added that if the Delaware courts fully reinstate the 2018 CEO Performance Award, the new interim grant will either be forfeited or offset and there will be no "double dip," it added.
The interim award shares vest only if Musk remains in a key executive role through 2027. They also come with a five-year holding period, except for covering tax payments or the purchase price.
Musk must pay Tesla $23.34 per share of restricted stock that vests, which is equal to the exercise price per share of the 2018 CEO Award, the company said in Monday's filing.
Tesla shares rose more than 2% in premarket trading.
The stock has lost about a quarter of its value so far this year as the company grapples with a decline in sales wrought by its aging vehicle line-up, tough competition and Musk's political stances that have alienated some potential buyers.
The challenges have been worsened by U.S. government cuts in support for EVs, with Musk saying at a post-earnings call last month that the waning subsidies could lead to a "few rough quarters" for the company before a wave of revenue from self-driving software and services begins late next year.
Data from research firm S&P Global Mobility shared exclusively with Reuters on Monday showed that Tesla's brand loyalty had plunged since Musk endorsed U.S. President Donald Trump last summer.
Tesla's aging lineup also faces stiffer competition from an array of EVs from legacy automakers, including General Motors, Hyundai and BMW.
Cybertruck, the only new model Tesla has released since 2020, has proved to be a flop despite Musk's prediction of hundreds of thousands of annual sales.
