A decision by the Delaware Chancery Court last week to nullify Tesla, Inc. TSLA CEO Elon Musk’s $56 billion compensation plan from 2018 continues to be debated among social-media users and analysts, and on Sunday, Tesla bull Cathie Wood offered her take on it.
What Happened: “I believe the Delaware court decision, forcing #TSLA to void the March 2018 vote on Elon Musk's performance-based pay package, is un-American, an assault on investor rights, and an insult to the Board of Directors of one of the most stunningly successful companies in US history,” said Wood in a post on X, formerly Twitter.
The fund manager said she knew Tesla Chairman Robyn Denholm professionally for over 17 years. “Robyn is a professional of unquestionable integrity with a no-nonsense, objective, truth-wins-out philosophy,” she said.
Following the analysis of the Delaware court decision, along with Ark’s legal counsel, Wood said legal nuances and the controversial interpretation of them have “missed the forest for the trees, spectacularly and unfairly.”
See Also: Everything You Need To Know About Tesla Stock
Musk Accomplishes ‘Herculean Task:’ Delving into the 2018 pay award, Wood said Tesla’s board had incentivized Musk with a “Herculean task that most analysts and auto manufacturers did not believe possible.” Ark’s research showed the target, though hittable, can be achieved only with brilliant execution, she noted.
Wood said she was “thrilled” in February 2018 that the Tesla board and Musk were aiming so him toward Ark’s bull-case price target of $4,000 in 2023, or $265 on a split-adjusted basis, compared to the $21 level at which it was trading when the price target was announced.
The fund manager also clarified that Ark, on behalf of its clients, voted for Musk’s compensation, along with about 80% of Tesla shareholders. “Nearly five years later, a Delaware judge has overruled the Board and shareholders, the latter of whom had the benefit of ample debate about the incentive plan's probability,” she said.
Musk agreed to no salary for the five years, Wood said. Also, she brought up the possibility of Musk receiving much less compensation if he hadn’t hit the lofty goals. “Instead, he shocked and delighted shareholders,” she said.
“Thanks to Elon's ingenuity and dogged determination, Tesla hit our bull case target price in 2021, two years earlier than we anticipated.”
Investing in Tesla has changed the lives of many shareholders for the better, said Wood. “They bought their first homes, put their children through college, and added to their retirement nest eggs, thanks to $TSLA,” she noted.
“Tesla's story epitomizes why people have flocked to America. The Delaware court's decision is an embarrassment to our country's ideals and a travesty.”
Musk thanked Wood for her comments on X.
Why It’s Important: Musk himself has lashed out at the court ruling and rued running Tesla as a public company. While Tesla can contest the ruling, analysts see the development as a good opportunity for the board to formulate a new pay plan for the billionaire and in the process cede the 25% of voting rights he has been demanding.
But the wrangling over Musk’s pay plan may not have come at a worse time for Tesla. The company is fundamentally challenged due to a slowdown in demand. The company’s strategy of taking down prices to boost volume amid rising competition has eroded its margin and impacted bottom-line results.
Reflecting the weak fundamentals, the stock has been languishing at depressed levels.
Tesla ended Friday’s session down 0.50% at $187.91, according to Benzinga Pro data.
Photo via WEF on Flickr
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