BofA Analyzes Tesla’s $1T Pay Proposal Impact on TSLA Stock

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BofA Analyzes Tesla’s $1T Pay Proposal Impact on TSLA Stock

Tesla Inc. (TSLA) is once again in the spotlight with its board’s proposal to grant CEO Elon Musk a staggering $1 trillion in incremental compensation. The proposal, which will be put to a shareholder vote on November 6, has elicited mixed reactions from analysts, particularly from Bank of America (BofA).

BofA’s Analysis of Tesla’s $1T Pay Proposal

Federico Merendi, an analyst at BofA, suggests that the approval of this compensation package could significantly affect TSLA stock. He asserts that a rejection could lead to adverse market reactions, especially if it results in Musk stepping back from his leadership role.

Implications of Rejection

If shareholders reject the proposal, TSLA may experience a drop in stock value.
Musk’s potential resignation could exacerbate the situation, according to Merendi.

Board Chair’s Concerns

Robyn Denholm, Tesla’s board chair, has echoed these sentiments. In a recent letter to investors, she warned that Musk’s departure could lead to substantial losses for the automaker. She highlighted that many stakeholders view his leadership as vital for the company’s future success.

Future Milestones

The proposed compensation package is contingent on Musk achieving ambitious goals over the next decade. These goals include:

Increasing Tesla’s market capitalization to $8.5 trillion.
Successfully selling millions of robotaxis and Humanoid robots.

Denholm stated, “Retaining and incentivizing Elon is fundamental to Tesla becoming the most valuable company in history.”

Pushback Against the Proposal

Despite the board’s support, the proposal has drawn significant criticism. A “Take Back Tesla” campaign initiated by various unions and watchdog organizations has emerged in opposition.

Additionally, the California Public Employees’ Retirement System (CalPERS) has signaled intentions to vote against the compensation package. Musk has countered these criticisms during Tesla’s recent third-quarter earnings call, labeling proxy advisory firms ISS and Glass Lewis as “corporate terrorists.”

Musk’s Vision for Tesla’s Future

Musk insists that the proposal is necessary for him to maintain a strong influence during Tesla’s ambitious expansion into artificial intelligence and robotaxi markets. He aims for a voting power in the “mid-20s” percentage range to be able to effectively lead.