Tesla shareholders should brace for more demands from Elon Musk down the road

Shareholders voted in favour of huge pay deal over concerns Musk ‘would become less engaged’ if it were rejected

Elon Musk's $56bn pay package was approved by Tesla shareholders even though it will dilute their own shareholdings. Photograph: Haiyun Jiang/The New York Times

A Delaware judge described Elon Musk’s 2018 pay package as “unfathomable” when she nullified the deal in January, but Tesla shareholders had no qualms about approving a $56 billion (€52.3 billion) pay package that would dilute their own shareholding.

Not only did three-quarters of Tesla investors approve Musk’s pay package, the share price surged as the news broke, adding billions to Tesla’s market value.

Counterintuitive as it may seem, analysts weren’t surprised. Tesla’s stock could fall 5 per cent if the pay package was voted down, Bernstein analyst Toni Sacconaghi cautioned before the vote, saying there were concerns Musk “would become less engaged” as chief executive.

That was echoed by Piper Sandler, which warned of “violent” downside if shareholders rejected the deal.

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The pay vote is only advisory, and legal issues mean Musk may not actually get his money, but he must be pleased investors heeded his implicit threats.

In January, Musk was accused of “blackmail” by Tesla shareholder Ross Gerber after saying he would “prefer to build” AI projects outside of Tesla unless his stake were nearly doubled to 25 per cent. Clearly, investors were worried by Musk’s intimations, and the share price jump confirms many view him as indispensable.

Musk has learned that implicit threats – or “blackmail”, as Gerber put it – can be rewarded by investors. What might he demand next? Tesla shareholders shouldn’t be surprised by further demands down the line.