Is Musk Worth 160% Of Tesla’s Total Profits?
- In 2018, Tesla shareholders approved a pay package that was worth $56 billion contingent on Musk meeting several targets
- In a recent regulatory filing, Tesla stated it would request a shareholder vote on the same pay package again.
Tesla, Inc. is asking shareholders to reapprove CEO Elon Musk‘s 2018 compensation plan, which was voided by a Delaware Chancery court. The decision remains divisive among stakeholders, and an environmental expert recently shared data highlighting the significant value of the pay package.
What Happened: Eric Roesch, an environmental expert and publisher of the ESG Hound blog, posted data on Threads in late April that sheds light on the size of the proposed payout. “Probably a good time to point out that Tesla’s total revenues since inception are $338 billion. Total Gross Profits are 73 billion and net income is 27 billion.”
He questioned the rationale behind the proposed compensation for Musk. “Musk demanding a $53 billion payout would be the equivalent of 16% of total revenues since 2009 72% of gross profits since 2009 195% of net income (i.e. real economic profits) since 2009,” Roesch said. “It’s lunacy and completely detached from reality.”
Is He Right? Tesla’s revenue grew to nearly $96.8 billion in 2023, an 18.8% increase. Data from Statista confirms that the company’s total revenue since inception exceeds $338 billion, with net income attributable to common shareholders reaching $28 billion.
In a recent regulatory filing, Tesla stated it would request a shareholder vote on the same pay package again. The company claims it has a present intrinsic value of $44.9 billion based on the April 12, 2024, closing price of Tesla stock. This translates to 13.26% of Tesla’s total revenue and nearly 160% of its total net income since inception.
Why It Matters: In 2018, Tesla shareholders approved a compensation package allowing Musk to purchase up to 304 million shares at a pre-set price of $23.34 upon achieving specific financial milestones. At the time, the company was valued at $59 billion, and the pay package, then at $55.8 billion, was unprecedented in corporate history.
The package’s value has decreased due to the recent stock price slump. Following the Delaware court’s decision, Tesla resubmitted the plan to shareholders in its mid-April proxy filing. This move coincided with the company’s decision to switch its state of incorporation from Delaware to Texas.
Possible Shareholder Vote Hurdles: Analysts like Daniel Ives predict a contentious annual shareholder meeting in June, considering the stock’s decline this year. While the stock rebounded somewhat after first-quarter results and Musk’s China visit, recent macro concerns have triggered another sell-off.
However, analysts still expect shareholders to scrutinize the proposal. Ann Lipton, Associate Professor of Business Law and Entrepreneurship at Tulane University Law School, suggests the proposal might require unanimous approval, rather than a simple majority, in an interview with CNBC.
She reasons that “since it’s framed as a payment for work already performed, the company doesn’t derive any benefit from it.”