Yesterday, Tesla (TSLA) shareholders voted to reinstate Elon Musk’s nearly $50 billion proposed pay package. It wasn’t even close in the end, with around 70% of votes cast being in favor, but that doesn’t necessarily mean that the drama is over. The Delaware court that first threw out the deal, saying that it felt that shareholders were insufficiently informed on the subject when it originally passed, has still to make its final ruling.
It is, however, hard to see how they can continue to claim that after this very high profile campaign around the deal, so any drastic action by the court looks unlikely. That is obviously a win for Musk, but what, if anything, does it mean for TSLA shareholders?
The answer is that, in the long run, it is likely to be positive.
$50 billion is a huge amount of money, even in the modern world of inflated CEO pay, but it is hard to argue that Musk doesn’t deserve it given his outsized role in the company, given fact that he has built it from nothing to a market cap of over $570 billion. Merit aside, at some point Musk and other senior officers in the company are going to get theirs and, from an investor’s perspective, that is a legitimate cost, not something to be concerned about.
That is why this measure passed so convincingly yesterday: for most it is a non-subject that they just want out of the way. They hope that will enable Musk to concentrate on things that are much more worrying for them, things like Tesla maybe losing its competitive edge, a slowing growth rate, or how the company is going to embrace the AI revolution.
On that front, Musk has said that advancements in AI and robotics could result in a Tesla valuation of $30 trillion in the future. The use of the word “could” here shows that Elon has at least learned his lesson about the nature of public pronouncements regarding the company, but it doesn’t detract from the “dreaming big” nature of the statement.
It is that kind of ambition for the company that got Tesla to where it is and is why the approval of the pay package and the implied retention of Musk at the head of the company is a good thing for investors. The “valuation” was presumably plucked out of thin air, but when you consider the potential of one as yet undeveloped part of Tesla’s business, robotaxis, it is not completely inconceivable. That is an area where Tesla has the kind of early market dominance that it had in EVs and, if the regulatory environment allows the industry to fulfill its potential, the potential earnings for the company are massive.
In order to take advantage of that opportunity, though, Tesla needs Musk at the helm. He has the vision to push it forward and the credibility to get that buy in, having been an early believer in the idea. True, he is not a hugely popular figure right now, particularly among politicians on the left, but the urge to get behind a green tech advancement where America leads the world will probably be stronger than the urge to punish Musk for seeming to support the other side.
That's the thing about Elon Musk: Love him or hate him, you cannot ignore him, and in some ways, cannot help but admire him. He is quirky and awkward, says outrageous things in outrageous ways, and has an annoying habit of shifting focus to some new shiny thing whenever things are going well with his main concern, but it is hard to argue with his record as a business leader. So, with his future at Tesla seemingly secure, investors will be looking to the future of the company rather than fixating on current problems, and that will be good for the stock and therefore for investors.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Martin Tillier
Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.
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