What’s Behind Tesla’s Surprise $29 Billion Award To Elon Musk?

In a major move aimed at retaining CEO Elon Musk during a critical phase for the company, Tesla has approved a fresh stock award worth approximately $29 billion. This interim pay deal comes as the electric vehicle (EV) maker pivots from its core auto operations toward the ambitious development of robotaxis and humanoid robots.

The board has issued Musk 96 million new shares, which he can claim if he continues in a senior executive position for another two years and the contested 2018 compensation package, currently under appeal, is not reinstated by the Delaware court. The new award replicates the 2018 deal’s exercise price of $23.34 per share and requires Musk to hold the shares for five years, reported Reuters.

Tesla said this award is a gesture of “good faith,” recognising Musk’s contribution and as an early step towards resolving the court-disputed 2018 package, originally valued at over $50 billion. A broader CEO compensation plan is expected to be presented to shareholders for approval at the company's annual meeting on November 6.

Maintaining Leadership Through Market Turbulence

The decision reaffirms the board’s commitment to Musk amid rising concerns over his political activities and ventures beyond Tesla, such as his AI firm xAI. Despite the recent turmoil—including declining sales, stiffer EV competition, and reputational challenges linked to Musk's right-leaning politics—the board believes Musk remains best placed to guide Tesla through its evolving business strategy.

"While we recognise Elon's business ventures, interests and other potential demands on his time and attention are extensive and wide-ranging... we are confident this award will incentivise Elon to remain at Tesla," said a special board committee formed to assess Musk’s compensation. The committee is led by Chair Robyn Denholm and independent director Kathleen Wilson-Thompson.

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Investors React Positively, Despite Legal Overhang

Musk’s share in Tesla could rise from 12.7 per cent to over 15 per cent following the grant, according to LSEG data reviewed by Reuters. Importantly, the company said it would not currently recognise the award as an expense unless the performance conditions become more likely to be met.

Tesla’s stock rose by nearly 2 per cent in early trading following the announcement, offering relief after a 25 per cent drop so far this year. "This stock grant will bind Musk to Tesla for the next two years," said Shawn Campbell of Camelthorn Investments.

2018 Pay Dispute Remains Unresolved

Meanwhile, Musk continues to challenge the Delaware court’s decision to void the 2018 package, arguing it brought substantial growth to Tesla and was approved twice by shareholders. Critics, however, remain sceptical. “This is simply a repackaged version of what was done years ago and was ruled improper by a judge,” said Charles Elson from the University of Delaware.

Elson, who supported the court’s decision to nullify the earlier award, added: “You don't have to incentivise him to stay. If he leaves, he throws away 13 per cent of the company, which is still a huge part of his net worth.”

Despite legal uncertainties, Tesla’s move underscores the board’s reliance on Musk’s leadership to steer the company through its next technological transformation. Whether the courts agree with this fresh compensation approach remains to be seen.