Tesla's board approved an interim stock award of 96 million shares for CEO Elon Musk early Monday, calling it a "good faith" first step and setting the price per share for Musk to exercise his 2018 CEO award package. A longtime Tesla stock bull said the step could "remove" Tesla stock "overhang."
The EV giant's board set a 23.34 purchase price for the 96 million shares in Musk's stock award program, according to regulatory filings. The current TSLA price is 1,200% higher than that level and the award is valued at $30 billion, based on Monday's stock price. Under terms of the award, Musk cannot "sell, transfer or dispose" of the TSLA shares covered by the 2025 interim CEO award for five years. The 96 million shares of restricted stock represent about 3% of TSLA stock outstanding and would give Musk, in total, around a 15% stake in the company.
The Tesla board will put a larger compensation package before shareholders at the Nov. 6 annual meeting.
In a letter to shareholders, the Tesla board said that this is an "important first step in compensating Elon Musk for his extraordinary work." The company said it continues to litigate Musk's shareholder-approved pay packages from 2018 and 2024 in the Delaware courts.
Tesla stock rose about 2.2% to 309.26 at the close for Monday's stock market, slightly off intraday highs of 312.12. Shares fell 4.25% last week to 302.63, retreating from key moving averages, but still in an actionable base.
Retaining Musk And Removing Overhang
Tesla wrote that it will not "double dip" and that if the Delaware court reinstates Musk's 2018 pay package, this award would be viewed as an interim and would be forfeited.
"Retaining Elon is more important than ever before," the Tesla board wrote Monday. "Tesla is at a critical inflection point that has the potential to create continued extraordinary value for you, the shareholders."
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Wedbush analyst Dan Ives, a longtime Tesla bull, wrote Monday that the interim award will "keep Musk as CEO of Tesla at least until 2030 and removes an overhang on the stock."
"While the groundwork is now in place for the next few years, it will be critical for the Tesla board of directors to get this long-term compensation strategy in place prior to the company's Nov. 6 shareholder meeting which would address the elephant in the room and remove a significant overhang on the stock," Ives said Monday.
EV Giant Under Pressure
On Friday, a federal jury in Miami, Fla., found the EV giant partly liable in the 2019 death of a pedestrian who was struck by a Tesla vehicle that was in Autopilot.
A jury of eight people decided Friday that Tesla was partly at fault in the case, due to the use and marketing of its Autopilot technology. Tesla will have to pay a large portion of $329 million in punitive and compensatory damages, according to news reports.
The $200 million in punitive damages were only assessed vs. Tesla, plaintiffs' attorneys told CNBC. They expect the EV maker to pay their clients $242.5 million, which includes one-third of the compensatory damages.
Musk said on X Friday that Tesla will appeal the ruling.
The lawsuit in Florida was over the 2019 death of Naibel Benavides Leon. The jury trial began on July 14 in Miami.
The facts of the case are that George McGee was driving his Tesla Model S in April 2019 when the car crashed into a parked SUV at more than 50 miles per hour. Benavides Leon, who had been standing next to the vehicle, was killed and Dillon Angulo was injured. Before the crash, McGee had engaged the Autopilot system, which can steer, brake and accelerate the car on its own.
Federal regulators have opened multiple investigations into Tesla's driver-assistance systems, including Autopilot and full self-driving, FSD.
The verdict that Tesla was partially at fault in the 2019 crash comes as Musk and Tesla are looking to expand their robotaxi ride-hailing service across the U.S., touting the company's autonomous driving capabilities as the key to valuation for the EV giant.
Musk on Sunday posted to X that Tesla vehicles "can drive themselves!"
Piper Sandler analysts on Monday wrote that Tesla investors should not overreact to the Miami court ruling.
"We've learned to ignore headlines related to Autopilot reliability. But the robotaxi roll-out has breathed new life into this topic, and we feel compelled to comment on recent media intrigue," the firm wrote.
"This case does not have direct implications for Tesla's FSD rollout," Pipe Sandler analysts added.
Tesla Stock Trend
TSLA shares dropped 1.8% to 302.63 during Friday's broad stock market sell-off, after slipping 3.4% on Thursday as the stock market responded to Tesla officially "expanding" its ride-hailing service to the Bay Area. However, the Model Y vehicles have a "safety operator" in the driver's seat, making it little different from FSD that can be equipped in current Tesla models.
In Austin, Texas, the limited robotaxi ride-hailing service has a safety operator in the front passenger seat.
In late July, TSLA undercut its 50-day and 200-day moving averages as Musk warned of a "few rough quarters" ahead in the Q2 conference call.
Tesla stock is still in a new base with a traditional 367.71 buy point, according to MarketSurge chart analysis. That base is within a much-larger consolidation.
Last week, RBC Capital Markets raised the firm's price target on TSLA to 325 from 319, writing that Tesla's valuation could far exceed current levels should it be successful on all of its goals. The analysts noted that regulatory hurdles remain for the company's robotaxi ride-hailing service and that high levels of used EV inventory along with the Biden-era EV tax credit going away should pressure the auto business for the next several quarters.
The stock initially soared after the robotaxi launch but TSLA is now down around 4% since the June 22 service release.
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As of Monday's close, Tesla stock was up 30% since the April 22 Q1 conference call, lifted by robotaxi bets. Shares are down about 23% for the year, and 37% below their all-time high of 488.54.
Tesla stock has a 21-day average true range of 4.06%. The ATR metric, available on IBD's MarketSurge charting tool, gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily stock market action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
Investors can keep tabs on the IBD Leaderboard watchlist, the IBD 50 list of top growth stocks and IBD SwingTrader along with the IBD Sector Leaders list.
Tesla stock has a 56 Composite Rating out of a best-possible 99. The stock also has a 76 Relative Strength Rating and a 55 EPS Rating.
Please follow Kit Norton on X @KitNorton for more coverage.
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