Investor's Corner
Tesla (TSLA) S&P exclusion: ‘Why the rush,’ Ex-Committee head says
Tesla’s (NASDAQ: TSLA) exclusion from the S&P 500 in September came as a shock to many shareholders and investors. However, a former Committee head for the index says that there is no rush, and Tesla’s hype will keep them in the conversation for possible inclusion in the future.
Ever since David Blitzer had retired from his post at the S&P, he had been enjoying a quiet life. However, when the S&P shockingly left Tesla out of its list of newly included companies in September, Blitzer’s phone started ringing off the hook.
“I’ve gotten calls from people who know I haven’t been on the committee for a year and a half and barely ever call me about stocks, and they say, why didn’t they do it?” Blitzer said in an interview with Bloomberg. “The amount of chatter about Tesla is staggering.”
But, Blitzer isn’t convinced that Tesla’s inclusion will never happen. He just believes that the some are waiting to see if the automaker’s recent rally on Wall Street is for real, or if the stock will backtrack in the coming months.
Tesla stock has grown over five-fold so far in 2020. It has made many investors richer, and many short-sellers poorer. Still, one thing is for certain, the stock’s valuation is not certain. This is where Blitzer believes the hold up is taking place.
“There’s plenty of times when there’s big names, popular names, well-known names that don’t get added the moment they’re eligible,” Blitzer said. The S&P’s goal was never to lump together the biggest companies. It was to construct “a great measure of the market,” he said.
But more so, Blitzer does not understand why so many people are so focused on getting Tesla into the S&P. “I think he real question is, why the rush?”
TSLA stock’s skyrocket in valuation this year has surged the company to be worth nearly $400 billion. The company’s performance on Wall Street, along with other tech heavyweights like Apple and Amazon, have helped the Nasdaq 100 gain 30% in value compared to the same day in 2019. The S&P has only gained 4% so far in 2020.
Tesla (TSLA) is leaving the current S&P 500 index’s performance in the dust
Blitzer says that Tesla’s exclusion is reminiscent of Microsoft’s leaving-out from the S&P from 1986 to 1994. Although Microsoft had a market cap of over $20 billion at the beginning of 1994, the S&P committee left the tech company outside of the index.
Blitzer says that he and his committee were given grief for the decision, but they decided to do it because Microsoft had owned more than half of its outstanding shares, and at least 50% must be floating for public investors to purchase.
“After the fact — they sold off some stock, we put in the index, everybody figured they’d forget — we still got complaints. So there have been other big ones, but I guess some of us learned to shrug and say, ‘we’ll wait ‘til next month,’” Blitzer said.
The Microsoft ordeal taught Blitzer that patience is the way to handle the inclusion of some companies where their future is uncertain. While Tesla’s run in 2020 is impressive, he states that there just needs to be more time to figure out if the run is for real.
Disclaimer: Joey Klender is a TSLA Shareholder.
Elon Musk
Analyst: Elon Musk’s $1 trillion Tesla pay deal modest against robot market potential
Jonas highlighted Tesla’s longer-term ambitions in robotics as a key factor in his assessment.
Morgan Stanley analyst Adam Jonas, one of Wall Street’s most ardent Tesla (NASDAQ:TSLA) bulls today, has described Elon Musk’s newly proposed $1 trillion performance-based compensation package as a “good deal” for investors.
In a note shared this week, Jonas argued that the package helps align the interests of Musk and Tesla’s minority shareholders, despite its shockingly high headline number.
Future market opportunities
Jonas highlighted Tesla’s longer-term ambitions in robotics as a key factor in his assessment. “Yes, a trillion bucks is a big number, but (it) is rather modest compared to the size of the market opportunity,” Jonas wrote. He added that the humanoid robot market could ultimately surpass the size of today’s global labor market “by a significant multiple.”
“We have entertained scenarios where the humanoid robot market can exceed the size of today’s global labor market… by a significant multiple,” Jonas wrote, as shared on X by Tesla watcher Sawyer Merritt.
The analyst likened the arrival of AI-powered robotics to the transformative effect of electricity, noting that “contemplating future global GDP before AI robots is like contemplating global GDP before electricity.” The Morgan Stanley analyst’s insights align with the idea that as much as 80% of Tesla’s future valuation could be tied to its Optimus humanoid robot program.
Elon Musk’s pay package
Tesla’s board has tied Elon Musk’s proposed compensation package to some of the most ambitious targets in corporate history. The 2025 CEO Performance Award requires the automaker’s valuation to soar from roughly $1.1 trillion today to $8.5 trillion over the next decade, a level that would make Tesla the most valuable company in existence.
The plan also demands a leap in Tesla’s operating profit, from $17 billion in 2024 to $400 billion annually. It also ties the CEO’s compensation to a number of product milestones, including the delivery of 20 million vehicles in total, 10 million active Full Self-Driving subscriptions, 1 million Tesla Bots, and 1 million Robotaxis in operation. Tesla’s board emphasized that Musk’s leadership was fundamental to achieving such ambitious goals, with Chair Robyn Denholm noting the award would align the CEO’s incentives with long-term shareholder value.
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
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