Elon Musk’s $26bn old pay deal could wipe out years of Tesla profits, analysts warn

Tesla is facing a fresh profit risk as the Delaware Supreme Court weighs the fate of Elon Musk’s 2018 pay deal. The ruling could reshape the electric-car maker’s earnings for years and raise new questions about how much value Tesla must hand over to keep its CEO motivated.

Tesla warned investors that losing the appeal could trigger a $26 billion accounting hit over two years. Experts say this impact would wipe out more than half of all profits Tesla has made since 2019. “This is a massive transfer of wealth from shareholders to the CEO,” said Brian Dunn of Cornell University, who called the board’s approach “not reasonable.” Tesla’s board argues the plan is needed to keep Musk focused on the company.

Even if Tesla wins in court, Musk’s new $1 trillion pay package could still squeeze profits over the next decade. Each performance goal unlocks billions in expenses, even before Tesla hits its big “Mars-shot” profit targets. Analysts warn the easiest goals could trigger huge payouts without changing Tesla’s core business. Tesla has not commented on the case.

The ruling stems from a judge’s earlier finding that Musk’s 2018 deal was negotiated by a board too close to him. If the ruling stands, Tesla must replace the package at today’s higher stock price. That $26 billion charge would cut profits by more than $3 billion per quarter through 2027. Lawyer Schuyler Moore said the dilution “hurts shareholders,” but added that Tesla’s stock often moves on Musk’s future promises, not its financial results. “This company is in fantasy-land,” he said.

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