‘Good faith’ payment: Why Elon Musk has been awarded Tesla shares worth $29 billion

Tesla’s board has approved a large stock award for owner and CEO Elon Musk.

On Monday, the electric vehicle maker gave Musk shares worth $29 billion, calling it a reward for years of what it described as “transformative and unprecedented” growth. The decision has been described as a “first step, ‘good faith’ payment” to Musk.

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It comes as the company remains locked in a legal fight to restore a much larger pay package that was earlier struck down by a judge in Delaware. The development also comes as Tesla experiences a drop in global sales.

Meanwhile, Reuters has reported that Tesla’s brand loyalty has fallen sharply since Musk publicly supported US President Donald Trump last summer, citing recent data from research firm S&P Global Mobility.

In this explainer, we look at why Tesla really paid Musk $29 billion worth of its shares.

Let’s take a look:

Why Tesla really paid CEO Musk $29bn in shares

Tesla has said Elon Musk has not received any pay in recent years because his 2018 compensation plan was rejected by a Delaware court.

This latest award comes eight months after a judge overturned that plan for a second time. Tesla has since appealed the decision.

On Monday, the company described the new grant as a “first step, good faith” effort to retain Musk and keep him focused, pointing to his work with SpaceX, xAI and other firms.

Notably, Musk recently said he needed more shares and control to avoid being removed by activist investors.

“Rewarding Elon for what he has done and continues to do for Tesla is the right thing to do,” the company said in a filing, adding that Tesla’s stock market value has grown by $735 billion since 2018.

The share award is worth about $29 billion, based on Friday’s closing price. Musk’s total net worth is now $350 billion, according to Bloomberg’s billionaires index.

The move is intended to keep Musk, who is seen as the face of Tesla and key to its robotaxi plans, focused on guiding the company as it shifts from traditional vehicles to autonomous cabs and robotics.

It may also silence any talk that the board is growing frustrated with Musk, especially after recent controversies including his entry into politics.

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Giving Musk more control shows that the board still believes he is the right person to lead Tesla through its future challenges, Reuters reported.

With this stock award, Musk’s stake in Tesla will rise from 12.7 percent to over 15 percent.

“While we recognise Elon’s business ventures, interests and other potential demands on his time and attention are extensive and wide-ranging… we are confident this award will incentivise Elon to remain at Tesla,” said a special committee that Tesla set up this year to review his pay.

Why Tesla sales have plunged

Tesla shares have dropped 25 percent this year, a decline largely linked to Elon Musk’s public support for Donald Trump, according to the Associated Press.

But that is not the only challenge. Tesla is also under pressure from growing competition, both from the automakers in Detroit and from Chinese carmakers.

In its most recent financial results, Tesla reported a sharp fall in profits, dropping from $1.39 billion to $409 million. Revenue was also down, and the company failed to meet even the reduced expectations set by Wall Street.

Research by S&P Global Mobility shows that Tesla’s customer loyalty hit a peak in June 2024. At the time, 73 percent of Tesla-owning households looking for a new car chose to buy another Tesla.

However, that number began to fall in July, just after Musk endorsed Trump following an assassination attempt on the Republican candidate in Pennsylvania.

Loyalty fell further and hit a low of 49.9 percent in March, slightly below the industry average. This happened after Musk launched Trump’s Department of Government Efficiency (Doge) in January and began cutting thousands of government jobs.

Analysts told Reuters that the drop in brand loyalty points to a shift among Tesla’s core customers, who may have been put off by Musk’s political involvement.

“If they have Democratic leanings, then perhaps they consider other brands in addition to Tesla,” Morningstar analyst Seth Goldstein told the news agency.

Meanwhile, in December, Delaware Chancellor Kathleen St. Jude McCormick stood by her earlier decision to cancel Musk’s 2018 pay plan. The ruling came in response to a lawsuit from a Tesla shareholder.

If the 2018 pay package is restored by the appeals court, the latest stock award given to Musk will be cancelled.

With inputs from agencies