Tesla’s (TSLA) $29 billion stock grant to CEO Elon Musk is once again in the spotlight, as experts weigh the long-term cost of the company’s record-breaking pay package. While the deal was designed to reward Musk for driving Tesla’s growth, critics warn it could become an expensive overhang for investors.
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Tesla investors cheered the news, sending TSLA shares up more than 6%, but questions remain about the long-term cost. While the package ties Musk’s wealth to Tesla’s performance, critics argue it adds little incentive since he already owns a large stake in the company. Research suggests such oversized grants can encourage risky behavior and may weigh on Tesla’s future growth potential, raising doubts about whether the stock can truly afford Musk’s expensive pay package.
Tesla’s $29B Bet on Musk
Earlier this month, Tesla’s Board of Directors approved a special pay package for Musk, which included 96 million shares of TSLA stock, valued at $29 billion. In a letter to shareholders, Tesla stated that these shares will be offered to Musk, despite the legal issues surrounding his 2018 pay package.
Recently, Gautam Mukunda, a Yale School of Management lecturer, suggested that the company’s long-term growth could be affected by the decision. Mukunda said that giving huge amounts of stock to CEOs who already own a lot can “encourage behaviors that are bad for companies and shareholders.”
This view challenges the usual reasoning for big stock awards, which is to motivate CEOs to perform even better. Mukunda argues this doesn’t hold up when CEOs already hold massive stakes. Before Tesla’s board approved the $29 billion package, Musk already owned about 13% of the company, worth roughly $120 billion at the time.
Kimbal Musk Backs Elon’s Package Amid Criticism
On the other side of the debate, Kimbal Musk, Musk’s younger brother, has spoken out in support of Elon’s pay package. He revealed in a recent interview with CNBC’s Squawk Box that Elon hasn’t taken a salary from Tesla since 2017, going without pay for six to eight years.
Kimbal further defended his brother, saying Elon deserves compensation, though he added that the final decision rests with Tesla shareholders.
Is Tesla Stock a Good Buy?
While the pay package remains a point of debate, investor attention is equally focused on Tesla’s future performance. Analysts continue to weigh in on the company’s growth prospects and stock forecasts.
On Wall Street, analysts have maintained a neutral stance on Tesla stock. According to TipRanks, TSLA stock has received a Hold consensus rating, with 13 Buys, 15 Holds, and eight Sells assigned in the last three months. The average Tesla stock price target is $305.37, suggesting a potential downside of 10.2% from the current level.
