Musk’s $3.5 billion award cheered by big Tesla shareholders
UNITED STATES: Two of Tesla’s largest shareholders are supporting a plan to award Elon Musk a compensation package valued at US$2.6 billion (NZ$3.5b), a show of confidence in the electric car maker’s bid to keep its visionary CEO around for the long haul.
Baillie Gifford & Co and T Rowe Price Group, which combined own about 14 per cent of Tesla stock, indicated to Bloomberg News that they would vote in favour of the board’s proposal at a March 21 special meeting.
The unprecedented pay package has been criticised as too costly by proxy adviser Glass Lewis & Co, which has recom- mended that investors reject the plan. While it would have slim chances of getting passed elsewhere, Tesla isn’t a typical company, and Musk isn’t a conventional chief executive officer.
‘‘We think what Tesla has achieved so far is pretty remarkable, but there’s more they can do in not just automotive, but the energy markets,’’ Tom Slater, a Baillie Gifford partner and fund manager, said yesterday.
‘‘Elon Musk – his drive and his vision – has been a really important part of getting us to this point. Tesla still needs that drive and that vision to push the business.’’
Musk, 46, owns about 20 per cent of Tesla. He and his brother Kimbal Musk, a company director, won’t vote on the plan at the company’s special meeting.
Edinburgh-based Baillie Gifford, founded in 1908 and one of the world’s most active technology investors, owns about 7.6 per cent of Tesla’s shares, according to data compiled by Bloomberg.
Baltimore-based T Rowe Price holds about 6.4 per cent.
‘‘We believe the final plan is well aligned with shareholders’ long-term interests,’’ T Rowe Price said in an emailed statement. While Tesla’s ownership structure and the long-term nature of its business presented a ‘‘unique chal- lenge’’, the board’s compensation committee addressed this ‘‘in the right way’’, it said.
The proposed award, resembling one Musk received in 2012, consists of 20.3 million stock options that will vest in 12 increments if market value thresholds and other financial targets are met.
Each tranche equals about 1 per cent of Tesla’s outstanding shares. The company’s market value has to reach US$650b for the award to fully vest – roughly a 12-fold increase.
Musk’s star power has helped to vault Tesla to an almost US$55b market capitalisation, exceeding the value of General Motors or Ford Motor.
While the company has struggled to mass-manufacture cars, including the new Model 3 sedan, Musk has convinced investors to buy into his vision of consumers converting to electric vehicles in droves.
Tesla lists its dependence on Musk as a risk factor in securities filings, and some analysts and short sellers have raised concern that the carmaker could run into trouble because of the amount of attention he devotes to other ventures, including rocket company Space Exploration Technologies. – Washington Post