Tesla Awards Musk $29B Stock to Focus on EV & AI
Date: August 4, 2025
By Jon Brodkin, Senior IT Reporter
Overview of the Interim Award
Tesla’s board has approved an interim equity award of 96 million shares—worth approximately $29.5 billion at $307 per share—to retain and incentivize CEO Elon Musk while the larger 2018 pay plan remains tied up in Delaware courts. Musk will acquire the shares at $23.34 each, the same strike price as his 2018 grant.
Board Rationale and Shareholder Letter
“Retaining Elon is more important than ever before… It is imperative to retain and motivate our extraordinary talent, beginning with Elon.”
—Robyn Denholm & Kathleen Wilson-Thompson, Tesla Board
The board’s letter to shareholders acknowledges Musk’s leadership roles at SpaceX, Neuralink, xAI, X Corp., and The Boring Company, emphasizing that Musk’s vision and technical skill set—particularly in AI, robotics, and battery R&D—are key to Tesla’s future product roadmap.
Background: The 2018 CEO Performance Award
- Grant size: 303.96 million options at $23.34 strike
- Current value: ≈$93 billion (based on 2025 share price)
- Legal status: Voided in Jan 2024 by Delaware Chancery Court for deficient governance review; reapproved by vote in June 2024, again rejected in Dec 2024.
Tesla is appealing to the Delaware Supreme Court with no clear timeline for a hearing. If reinstated, the interim award will be forfeited to avoid any “double dip.”
Key Technical and Financial Terms
- Vesting & Holding Period: Vesting over two years; five-year mandatory hold post-vesting.
- Voting Rights: Incrementally phased in to align Musk’s governance incentives with shareholder value.
- Accounting Impact: Initial charge ≈$2.3 billion GAAP expense; attributable to share-based compensation under ASC 718.
Latest Market Reaction and Brand Loyalty Trends
Since the start of 2025, Tesla’s share price has declined ~19% amid softer deliveries and macroeconomic headwinds. According to S&P Global Mobility:
- Brand loyalty among U.S. Tesla owners fell from 73% (June 2024) to 49.9% (March 2025), rebounding slightly to 57.4% in May.
- S&P analyst Tom Libby: “I’ve never seen this rapid of a decline in such a short period.”
Additional Analysis
1. Governance Implications and Precedents
The Delaware Chancery’s decisions underscore growing scrutiny on board independence and director conflicts of interest. Experts like Prof. Ann Lipton (University of Colorado) note that the 2019 Equity Incentive Plan wasn’t originally intended for Musk, raising questions about retroactive application of shareholder-approved plans. Corporate governance analysts predict more stringent reviews for large CEO awards under future proxy advisor guidelines.
2. Impact on Tesla’s Technical Roadmap
Elon Musk’s oversight is central to several high-stakes engineering projects:
- Full Self-Driving (FSD) Compute: Transition to Tesla’s custom Dojo-derived FSD chip (16 TFLOPS peak) is in beta in select vehicles.
- 4680 Battery Cells: Scaling gigafactory production in Texas to 200 GWh/year using dry-coated electrode technology.
- Optimus Humanoid Robot: Version 2 prototype testing for advanced AI inference; potential productivity boost in factories.
Retaining Musk ensures continuity of these initiatives, which require cross-disciplinary integration of AI algorithms, robotics control systems, and high-volume manufacturing.
3. Market Risk and Investor Sentiment
Institutional investors are closely watching the legal saga. Key considerations include:
- Dilution Risk: Interim award ups Musk’s stake from ~13% to ~16%; full 2018 plan would exceed 20% ownership, raising concerns about concentrated voting power.
- Litigation Uncertainty: Prolonged appeals may unsettle proxy advisory firms like ISS and Glass Lewis ahead of the November annual meeting.
- Operational KPIs: Quarterly margins, production ramp of Model Y variants, and software subscription revenues (e.g., FSD pay-per-use) will factor into perceived CEO value creation.
Next Steps and Long-Term Strategy
The board plans a comprehensive CEO compensation strategy for shareholder vote on November 6, integrating performance metrics tied to:
- Annual adjusted EBITDA growth
- Advanced autonomy milestone completion (Level 4 on 10 million miles of shadow data)
- Global vehicle deliveries and energy storage deployments
Meanwhile, Tesla’s legal team continues to push for reinstatement of the 2018 award, with potential catalysts being a favorable Delaware Supreme Court ruling or a negotiated settlement that satisfies both governance standards and Musk’s retention needs.
References & Expert Commentary
- Delaware Chancery Court opinions (Jan 2024 & Dec 2024)
- SEC Form 8-K filing, August 3, 2025
- Prof. Ann Lipton, University of Colorado Law School analysis
- Tom Libby, S&P Global Mobility research
- Reuters, Financial Times market reports