Executive compensation has always been something of a hot-button issue, especially when hearing stories about regular people who are suddenly jobless while someone at the top bought a superyacht. Now, things are getting strange for electric vehicle stock Tesla (NASDAQ:TSLA), where CEO Elon Musk‘s pay package got invalidated by the courts. Investors aren’t taking the news well either and sent Tesla shares down fractionally in Wednesday morning’s trading.
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Following the ruling of a Delaware judge that invalidated a compensation package for Elon Musk set up around six years ago—that represents a hefty $55 billion—much of the landscape was left shocked in its wake. Even Dan Ives out at Wedbush Securities called the decision shocking, primarily because most onlookers figured that the case had already been thrown out. Now, Tesla’s board is left to figure out what to do in the wake of this unexpected decision.
Nevertheless, there are several options to consider; one of these is just to set up a completely new pay package and let the shareholders decide. Another option is to simply appeal the Delaware court’s decision. Or—and Musk himself might be most in favor of this—the board could simply give Musk the 25% share of votes that he’s been bucking for lately and call it a day.
Judicial Overreach or Vital Fair Play?
Some might wonder how a judge gets the right to tell a corporation what it is and isn’t allowed to pay its CEO. Some might indeed find Musk’s pay package overly generous, but then, it’s worth noting—as Musk himself has—that he’s made millionaires out of line workers, so why not make him a multi-billionaire? Further, reports note that Elon Musk’s tenure has meant a hefty $550 billion in extra value for Tesla, so giving him roughly 10% of the gains he produced is a pretty fair finders’ fee, all things considered. Especially since, again, it’s not like the line workers are losing jobs or going hungry.
Is Tesla a Buy or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on TSLA stock based on 12 Buys, 16 Holds, and six Sells assigned in the past three months, as indicated by the graphic below. After a 4.78% gain in its share price over the past year, the average TSLA price target of $220.98 per share implies 16% upside potential.
