Investor's Corner
Wall Street explains why they are bullish on Musk-Trump alliance
Morgan Stanley analyst Adam Jonas released a new research note clarifying why he raised the target price for Tesla Motors (TSLA) to $305 per share. Jonas warns investors who have equated Elon Musk’s new relationship with Donald Trump with a higher stock price. “There is no way to quantify the value (if any) of Tesla management’s advisory relationship with the new administration,” Jonas said.
Instead, Jonas emphasized the congruence between Trump’s desire for American workers to build products in American factories and Tesla’s business model which does both. Tesla is a leader in the automotive segment in both categories. “When you look at the businesses Tesla is in, you see many areas of overlapping interest” with the Trump administration, Adam Jonas told New York Times correspondent James Stewart on Friday. “To the extent the new administration prioritizes the creation of valuable, innovative high tech and manufacturing jobs, Tesla stands at the epicenter of that.”
In fact, the auto industry manufactures relatively few cars that can be truly called “US Made.” According to a chart compiled by Cars.com last year, the number of models of light duty vehicles that qualify for that label has fallen precipitously in recent years from nearly 30 in 2010 to only 8 in 2016.
Another analyst weighing on the Musk-Trump connection is Andrew Hughes, an alternative energy analyst for Credit Suisse. Hughes said solar investors “aren’t nearly as negative as they were the day after the election.” In part, that is because solar power — which up until now has needed significant federal incentives to survive — has become so inexpensive, particularly with regard to coal, that many industry observers think it will survive on its own even if those incentives are eliminated by the Trump administration.
Despite Donald Trump’s antipathy to renewable energy, business is all about the bottom line. If solar costs less than coal, then business is going to switch to solar no matter what the president has to say. Elon Musk is also heavily involved in re-imagining the role of the electrical grid. He sees battery storage as the key to making the grid compatible with renewables like solar and wind.
Musk has gone head-to-head with utility companies, including NV Energy, which is owned by Warren Buffett’s Berkshire Hathaway company. In 2016, Musk and SolarCity lost a round when the Nevada PUC enacted new rules imposing monthly assessments on people with rooftop solar systems. In return, SolarCity terminated its operations in the state, laying off hundreds of local workers.
Nevertheless, Musk expects both Tesla with its grid scale batteries and SolarCity with its rooftop systems — including the revolutionary Solar Roof — to play an ongoing part in how people get their electricity in the future. Last fall, just prior to unveiling the Solar Roof, Musk said, “The solution is both local power generation and utility power generation — it’s not one or the other”. He went on to suggest that the proper mix would be about one third residential rooftop power and two thirds power from traditional utility companies.
The US Energy Department stated in its annual energy and jobs report issues earlier this month that “solar technologies, both photovoltaic and concentrated, employ almost 374,000 workers, or 43 percent of the electric power generation work force.” Compare that to the number of workers employed to make electricity from coal. That number is just 86,000 workers. “The jobs data is a compelling argument in favor of the tax credits,” Andrew Hughes said. “I want to believe that Trump won’t kill solar, but there’s still a lot of uncertainty. The big question: Will he take away the tax credits?”
Musk received plenty of blowback when he decided to endorse former CEO of ExxonMobil Rex Tillerson for the position of Secretary of State. That makes him the public face of the fossil fuel industries and theoretically a natural adversary for Musk and his commitment to zero emissions energy. But Elon thinks Tillerson can temper some of the president’s more outrageous plans to extract every last molecule of fossil fuel that can be found on the planet.
Tillerson also advocates for a carbon tax, an idea that Musk strongly supports. According to reports, Musk floated the carbon tax idea at last week’s meeting of business advisors to the president. While Donald Trump did not dismiss the idea out of hand, Musk found little to no support from others in the room.
Trump likes to think big and take bold actions. So does Elon Musk. In some ways, it’s easy to see why the two men might take a liking to each other. Trump is especially interested in space exploration, something that fits perfectly with Musk’s passion for establishing a human colony on Mars.
Job creation in America for American workers, rebooting the traditional utility grid to use modern technology, sending people off to live on other planets. These are all things that interest both men. But cozying up to Trump also exposes Musk to dissatisfaction with some of the president’s less popular plans, like building walls with neighboring countries, sending federal troops into American cities, and banning immigration by people who espouse certain religions. To be successful, Tesla will need a broad base of customers. Musk has been careful to avoid political involvement so far. His association with the new president exposes him to new dangers.
One gets the sense that Musk is willing to accept some of the negatives if he can make progress on his passion for a carbon tax. But if that idea is stymied by Trump and his advisors, Elon’s desire to work with the new administration may cool considerably. Perhaps the most danger comes from the unpredictability and volatility of the new president, who can change course in a heartbeat. Musk will be need to be nimble to avoid getting rolled over by Trump in the future.
The president is scheduled to meet with his council of business leaders today, at which time he says he will provide details about his plant to cut government regulation of business by “75% or more.” That will give Musk yet another chance to evaluate the business acumen of Donald Trump and decide whether his involvement with his plans will pay dividends for him and the companies he leads. As Adam Jonas said in his report, it is impossible to predict how the association between Trump and Musk will benefit either.
Elon Musk
Tesla board reveals reasoning for CEO Elon Musk’s new $1 trillion pay package
“Yes, you read that correctly: in 2018, Elon had to grow Tesla by billions; in 2025, he has to grow Tesla by trillions — to be exact, he must create nearly $7.5 trillion in value for shareholders for him to receive the full award.”
Tesla’s Board of Directors has proposed a new pay package for company CEO Elon Musk that would result in $1 trillion in stock offerings if he is able to meet several lofty performance targets.
Musk, who has not been meaningfully compensated since 2017, completed his last pay package by delivering billions in shareholder value through a variety of performance-based “tranches,” which were met and resulted in the award of billions in stock.
Elon Musk’s new pay plan ties trillionaire status to Tesla’s $8.5 trillion valuation
However, Musk was unable to claim this award due to a ruling by the Delaware Chancery Court, which deemed the payout an “unfathomable sum.”
Now, the company is taking steps to ensure Musk gets paid, as the Board feels that it is crucial to retain its CEO, who has been responsible for much of the company’s success.
This is not a statement to undermine the work of all of Tesla’s terrific employees, but a ship needs to be captained by someone, and Musk has proven he is the right person for the job.
The Board also believes that, based on a statement made by the company in its proxy, various issues will be discussed during the upcoming Shareholder Meeting.
Robyn Denholm and Kathleen Wilson-Thompson recognized Musk’s contributions in a statement, which encouraged shareholders to vote to approve the payout:
“We’re asking you to approve the 2025 CEO Performance Award. In designing the new performance award, we explored numerous alternatives. Ultimately, the new award aims to build upon the success of the 2018 CEO Performance Award framework, which ensure that Elon was only paid for the performance delivered and incentivized to guide Tesla through a period of meteoric growth. The 2025 CEO Performance Award similarly challegnes Elon to again meet a series of even more aspirational goals, including operational milestones focused on reaching Adjusted EBITDA targets (thresholds that are up to 28 times higher than the 2108 CEO Performance Award’s top Adjusted EBITDA milestone) and rolling out new or expanded product offerings (including 1 million Robotaxis in commercial operation and delivery of 1 million AI Bots), all while growing the company’s market capitalization by trillions of dollars.
Yes, you read that correctly: in 2018, Elon had to grow Tesla by billions; in 2025, he has to grow Tesla by trillions — to be exact, he must create nearly $7.5 trillion in value for shareholders for him to receive the full award.
In addition to these unprecedented performance milestones, the 2025 CEO Performance Award also includes innovative structural features, born out of the special committee’s considered analysis and extensive shareholder feedback. These features include supercharged retention (at least seven and a half years and up to 10 years to vest in the full award), structural protections to minimize stock price volatility due to administration of this award and, thereafter, incentives for Elon to participate in the Board’s continued development of a framework for long-term CEO Succession. If Elon achieves all the performance milestones under this principle-based 2025 CEO Performance Award, his leadership will propel Tesla to become the most valuable company in history.”
Musk will have a lot of things to accomplish to receive the 423,743,904 shares, which are divided into 12 tranches.
However, the Board feels he is the right person for the job, and they want him to remain the CEO. This package should ensure that he stays with Tesla, as long as shareholders feel the same way.
Investor's Corner
Elon Musk’s new pay plan ties trillionaire status to Tesla’s $8.5 trillion valuation
Shareholders are expected to vote on the proposal at the annual meeting on November 6.
Tesla’s board has proposed a new compensation package for CEO Elon Musk that could make him the world’s first trillionaire and Tesla the most valuable company in history.
The 2025 CEO Performance Award, outlined in a securities filing on Friday, would be worth up to $900 billion in Tesla stock (NASDAQ:TSLA) if the automaker achieves a series of aggressive performance and valuation goals, according to the New York Times.
Shareholders are expected to vote on the proposal at the annual meeting on November 6.
Tesla is aiming for an insane $8.5 trillion market cap
The package requires Musk to lift Tesla’s market capitalization from about $1.1 trillion today to $8.5 trillion over the next decade. At that level, Tesla would surpass every major public company in existence. Nvidia, currently the world’s most valuable firm, has a market cap of around $4.2 trillion today, as noted in a Motley Fool report. Microsoft and Apple follow at $3.8 and 3.6 trillion each, while Saudi Aramco is valued at around $1.5 trillion.
If Tesla achieves its $8.5 trillion target, it would be worth more than twice Nvidia’s present valuation and nearly eight times its current size. The compensation plan also requires Tesla’s operating profit to grow from $17 billion last year to $400 billion annually.
Elon Musk’s path to a trillionaire status
Apart from leading Tesla to become the world’s biggest company in history, Musk is also required to hit several product targets for the electric vehicle maker. These include the delivery of 20 million Tesla vehicles cumulatively, 10 million active FSD subscriptions, 1 million Tesla bots delivered, and 1 million Robotaxis in operation.
Tesla board chair Robyn Denholm and director Kathleen Wilson-Thompson said retaining Musk is “fundamental to Tesla achieving these goals and becoming the most valuable company in history.” If successful, the plan would raise Musk’s Tesla stake from 13% to about 25%, further consolidating his control. It would also result in the CEO earning $900 billion in TSLA stock, allowing him to effectvely become a trillionaire.
The proposal mirrors a 2018 compensation plan that was invalidated in Delaware court earlier this year in the way that it is focused on very aggressive targets and operational milestones. Tesla has since shifted its corporate registration to Texas, where challenges from potential activist shareholders are less of a risk.
Tesla’s SEC filing can be viewed below.
www-sec-gov-Archives-edgar-data-1318605-000110465925087598-tm252289-4_pre14a-htm… by Simon Alvarez
Investor's Corner
Shareholder group urges Nasdaq probe into Elon Musk’s Tesla 2025 CEO Interim Award
The SOC Investment Group represents pension funds tied to more than two million union members, many of whom hold shares in TSLA.
An investment group is urging Nasdaq to investigate Tesla (NASDAQ:TSLA) over its recent $29 billion equity award for CEO Elon Musk.
The SOC Investment Group, which represents pension funds tied to more than two million union members—many of whom hold shares in TSLA—sent a letter to the exchange citing “serious concerns” that the package sidestepped shareholder approval and violated compensation rules.
Concerns over Tesla’s 2025 CEO Interim Award
In its August 19 letter to Nasdaq enforcement chief Erik Wittman, SOC alleged that Tesla’s board improperly granted Musk a “2025 CEO Interim Award” under the company’s 2019 Equity Incentive Plan. That plan, the group noted, explicitly excluded Musk when it was approved by shareholders. SOC argued that the new equity grant effectively expanded the plan to cover Musk, a material change that should have required a shareholder vote under Nasdaq rules.
The $29 billion package was designed to replace Musk’s overturned $56 billion award from 2018, which the Delaware Chancery Court struck down, prompting Tesla to file an appeal to the Delaware Supreme Court. The interim award contains restrictions: Musk must remain in a leadership role until August 2027, and vested shares cannot be sold until 2030, as per a Yahoo Finance report.
Even so, critics such as SOC have argued that the plan does not have of performance targets, calling it a “fog-the-mirror” award. This means that “If you’re around and have enough breath left in you to fog the mirror, you get them,” stated Brian Dunn, the director of the Institute for Comprehension Studies at Cornell University.
SOC’s Tesla concerns beyond Elon Musk
SOC’s concerns extend beyond the mechanics of Musk’s pay. The group has long questioned the independence of Tesla’s board, opposing the reelection of directors such as Kimbal Musk and James Murdoch. It has also urged regulators to review Tesla’s governance practices, including past proposals to shrink the board.
SOC has also joined initiatives calling for Tesla to adopt comprehensive labor rights policies, including noninterference with worker organizing and compliance with global labor standards. The investment group has also been involved in webinars and resolutions highlighting the risks related to Tesla’s approach to unions, as well as labor issues across several countries.
Tesla has not yet publicly responded to SOC’s latest letter, nor to requests for comment.
The SOC’s letter can be viewed below.
Tesla board reveals reasoning for CEO Elon Musk’s new $1 trillion pay package
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