Tesla’s stock market value has declined by 52% since peaking in November 2021, resulting in a loss of $620 billion in market capitalization. However, on June 13, CEO Elon Musk received a vote of support from Tesla shareholders for his $48 billion pay package. Despite this vote, the Delaware ruling that invalidated Musk’s pay package still stands, and more litigation is expected. This vote does not change Musk’s unimpressive strategy to boost growth, which has led to the company’s disappointing performance and prospects.
Following the shareholder vote, Musk expressed delight and thanked shareholders for their support. While this vote reaffirmed a pay award of more than $45 billion for Musk, the fate of his $48 billion pay package remains uncertain. In 2018, Musk’s pay package was approved after Tesla’s business improved, but recent declines in the company’s stock are attributed to underwhelming performance. The 2018 pay package was deemed excessive by the Court of Chancery in Delaware due to conflicts of interest involving the board members’ ties to Musk.
Tesla’s stock has underperformed in 2024, falling by 24% compared to the S&P 500’s 14% increase. The company’s disappointing performance can be attributed to various factors, including lower-than-expected vehicle deliveries and concerns about attracting price-sensitive buyers. Tesla’s shift towards Robotaxis failed to inspire confidence in revenue growth. The company reported poor earnings in the first quarter of 2024, with declining revenue and negative cash flow. Despite this, Tesla’s stock saw a 28% increase following announcements of future affordable models and a focus on AI robotics.
Musk’s $48 billion pay package has not been reinstated, and Tesla is seeking to reverse the Delaware court’s ruling on the matter. The shareholder vote in favor of Musk’s pay package led to a rise in Tesla’s stock price, but concerns remain about the company’s financial performance. While some investors believe the shareholder vote demonstrates Musk’s commitment to raising Tesla’s stock price, others question his ability to lead the company in a competitive market. Tesla’s ambitious goals, such as achieving a $5 trillion market capitalization through self-driving robotaxis, may be viewed as overvalued by Wall Street analysts.
Despite the positive vote from shareholders, investors may be better off investing in a low-cost S&P 500 index fund rather than relying on Tesla’s stock performance. The future of Musk’s pay package and Tesla’s growth prospects remain uncertain, as the company faces challenges in meeting financial targets and delivering on its promises. Ultimately, the fate of Tesla’s stock price and Musk’s pay package will depend on the company’s ability to address underlying issues and regain investor confidence.
