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Tesla's Musk Pay Could Cost Billions
20 Nov
Summary
- A court ruling on Musk's 2018 pay package could hit Tesla's profits by $26 billion.
- This massive compensation expense could significantly impact Tesla's earnings.
- Declining sales and rising costs exacerbate profit concerns for Tesla.
Tesla's financial future is significantly tied to Elon Musk's compensation, with a 2018 pay package currently under legal review. A Delaware Supreme Court decision could force Tesla to account for a $26 billion expense if its appeal fails, impacting profits substantially. This figure represents over half of the company's net income since 2019.
Beyond the immediate legal threat, Musk's trillion-dollar compensation plan carries long-term profit uncertainties. Each performance goal met could trigger billions in payouts, potentially squeezing earnings further. This situation is particularly concerning as Tesla is already contending with declining car sales, reduced subsidies, and escalating costs for ambitious projects.
While some suggest shareholders may dismiss stock-compensation expenses as mere accounting, experts warn that such large impacts on net income signal potential breaches of fiduciary duty. The board's argument that Musk's pay is tied to "Mars-shot milestones" is countered by concerns that even achievable goals could lead to substantial payouts, affecting shareholder value.
