Musk answers Tesla’s pay proposal with US$1 billion stock buy

ELON Musk responded to an unprecedented pay proposal from Tesla’s board by buying about US$1 billion worth of shares, sending the stock soaring in premarket trading.

The billionaire bought the shares indirectly through a revocable trust on Sep 12, according to a regulatory filing released Monday (Sep 15). The purchase coincided with Tesla chair Robyn Denholm speaking with reporters about the merits of awarding Musk around US$1 trillion worth of stock if the company achieves a series of ambitious market value and performance milestones.

Tesla shares jumped as much as 8.7 per cent in premarket trading in New York. If the gain carries over into the regular trading session, the stock will trade up on a year-to-date basis, having recovered from a 45 per cent decline as of early April.

Musk, 54, last bought Tesla stock in the open market in February 2020, according to data compiled by Bloomberg. The CEO offloaded more than US$20 billion of the company’s shares in 2022, the year he acquired Twitter.

The purchase amounts to a show of confidence in Tesla’s prospects after a challenging first half of the year in which vehicle sales slumped 13 per cent worldwide. While Musk has talked up Tesla’s pursuit of robotaxis and humanoid robots, he’s also cautioned that the company could be in for “a few rough quarters” after the US phases out electric-car purchase incentives at the end of this month.

Tesla’s car business has continued to show signs of strain, with market researcher Cox Automotive estimating that its share of the US electric vehicle market slipped below 40 per cent in August. Registrations also kept slumping last month in major markets across Europe, and vehicle shipments from the company’s Shanghai factory dropped in both July and August.

Denholm, who’s been chair of Tesla’s board since 2018, called Musk a “generational leader” in a Sep 12 interview with Bloomberg Television. She downplayed concerns that Musk’s political activity has hurt the company’s performance and suggested he has wide latitude in this regard going forward.

“What he does from a personal perspective, in terms of his political motivations, is up to him,” Denholm said. “We’re in a democracy, so everybody gets to voice their points of view.”

The following day, Musk made a remote appearance at a London march organised by the far-right agitator known as Tommy Robinson. The billionaire predicted that “violence is coming” to the UK and told rally goers: “You either fight back, or you die.”

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A spokesperson for UK Prime Minister Keir Starmer called Musk’s language inflammatory and dangerous.

Musk is the world’s richest person with a net worth of about US$419 billion, according to the Bloomberg Billionaires Index.