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Tesla's $2.6 billion stock award for Musk is too high: ISS

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03/09/2018 | 12:56am CEST
FILE PHOTO: Elon Musk, founder, CEO and lead designer at SpaceX and co-founder of Tesla, speaks at the International Space Station Research and Development Conference in Washington

(Reuters) - Proxy advisory firm Institutional Shareholder Services on Thursday recommended Tesla Inc stockholders reject a multi-billion-dollar, 10-year pay package for Chief Executive Elon Musk, saying the "unprecedented" award was too rich.

(Reuters) - Proxy advisory firm Institutional Shareholder Services on Thursday recommended Tesla Inc stockholders reject a multi-billion-dollar, 10-year pay package for Chief Executive Elon Musk, saying the "unprecedented" award was too rich.

The compensation arrangement announced in January involves no salary or cash bonus but sets up rewards for Musk based in part on electric vehicle maker Tesla's market value rising to $650 billion over the next 10 years, from around $56 billion currently.

Palo Alto, California based Tesla is under pressure as its much-anticipated Model 3 sedan has already missed several key production targets.

ISS calculated the award was worth $3.7 billion on the grant date, compared with the $2.6 billion projected by Tesla. It joins advisory firm Glass Lewis in recommending against the proposal.

Tesla shareholders are due to vote on March 21, and the company needs majority approval for the proposal to go through. The company declined to comment.

The award "locks in unprecedented high pay opportunities for the next decade, and seemingly limits the board's ability to meaningfully adjust future pay levels in the event of unforeseen events or changes in either performance or strategic focus," ISS said on Thursday.

The advisory firm also flagged that a big part of the award could be earned even if Tesla, which reported its worst ever loss in the fourth quarter, does not sustainably make profits in the future.

"Musk's financial interests are already strongly aligned with Tesla; it is questionable whether an additional $2.6 billion grant is necessary or appropriate to further align his interests when he already owns a 22 percent stake in the company," ISS added.

Some analysts have questioned whether billionaire Musk's other interests, from space exploration to tunnel boring technology, are a distraction at what is seen as a critical time for Tesla.

Musk took to Twitter on Thursday to call on U.S. President Donald Trump to challenge Chinese auto trade rules.

Tesla shares were down half a percent at $327.25 after markets closed on Thursday.

(Reporting by Arjun Panchadar and Nivedita Bhattacharjee in Bengaluru; Editing by Peter Henderson, Shounak Dasgupta and Cynthia Osterman)

By Nivedita Bhattacharjee

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Financials ($)
Sales 2018 19 824 M
EBIT 2018 -637 M
Net income 2018 -1 669 M
Debt 2018 8 303 M
Yield 2018 -
P/E ratio 2018 -
P/E ratio 2019 649,14
EV / Sales 2018 3,44x
EV / Sales 2019 2,45x
Capitalization 59 861 M
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Technical analysis trends TESLA
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Income Statement Evolution
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Mean consensus HOLD
Number of Analysts 26
Average target price 305 $
Spread / Average Target -16%
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Managers
NameTitle
Elon Reeve Musk Chairman & Chief Executive Officer
Deepak Ahuja Chief Financial Officer
Jeffrey B. Straubel Chief Technology Officer
Gary Clark Chief Information Officer
Kimbal Musk Director
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