On August 3, 2025, Tesla’s Board of Directors granted Elon Musk a substantial interim equity award—96 million shares of restricted common stock—under the company’s 2019 Equity Incentive Plan. This “2025 CEO Interim Award” is designed to bridge potential gaps in Musk’s existing 2018 performance‐based award, contingent on resolution of ongoing Delaware litigation, and to reinforce long‐term alignment with shareholders. Below, we unpack the key terms, governance safeguards, and potential implications for investors.
Quick Links:
- Read Tesla’s 8-K Announcement
- Read Tesla’s Press Release
- CEO Pay: The $25 Million Plus Pay Club (2025)
Background and Purpose of Musk Stock Awards
In its Q1 2025 Form 10-Q, Tesla disclosed formation of a Special Committee—comprised of disinterested directors Robyn Denholm and Kathleen Wilson-Thompson—to evaluate CEO compensation matters. Musk and his brother Kimbal recused themselves from all deliberations. The award addresses uncertainties arising from the Tornetta v. Musk derivative litigation (Del. Ch. C.A. No. 2018-0408-KSJM) and related appeals, which may restore Musk’s rights under his 2018 performance option award. The interim grant ensures Musk retains equivalent upside if Delaware courts ultimately permit full exercise of his earlier award.
Award Mechanics
Here is a quick summary of Tesla’s stock awards to Elon Musk.
| Term | Detail |
|---|---|
| Shares Granted | 96 million restricted shares of common stock. |
| Grant Date | August 3, 2025 (pending HSR Act clearance). |
| Vesting | Automatic on August 3, 2027, subject to Musk’s “Eligible Service” as CEO or specified executive. |
| Purchase Price | $23.34 per share (equal to the 2018 award’s exercise price). |
| Holding Period | No sales until after August 3, 2030, except to cover taxes or exercise costs, or as approved. |
| Accelerated Vesting | Upon a Change in Control or Musk’s death, if in Eligible Service. |
Anti-Dilution & “No Double Dip” Provisions
There are several important aspects of this award that protects against Musk receiving benefit of this award on top of the continuing attempts to enact the 2018 stock awards and to ensure alignment between Musk and shareholders.
- Early Forfeiture Trigger: If a final, non-appealable decision allows full exercise of the 2018 award before vesting, the interim award is entirely forfeited.
- Excess Share Adjustment: Should Musk regain some—but not all—2018 option rights, the interim award will be reduced or, if already vested, Musk must return shares (or forfeit equivalent 2018 options) to prevent upside “double dipping.”
- Limited Pledging Rights: Musk may only pledge shares to satisfy tax or exercise obligations, preserving shareholder confidence in his long-term commitment.
Governance Considerations
The board argues that the stock awards are done consistent with strong governance principals with the decision being made by disinterested directors, long-term alignment with shareholders, and accounting for the potential outcomes of the continuing Tornetta litigation.
- Disinterested Director Approval: The board will argue that the Special Committee’s role—and recusal by Musk and Kimbal—reinforces independence in executive compensation oversight. However, critics of the agreement will continue to maintain that Musk has outsized influence on the board and that Denholm and Wilson-Thompson aren’t acting with true independence.
- Long-Term Alignment: A three-year vest plus five-year holding period signals commitment to sustained performance, mitigating concerns over short-term stock movements.
- Litigation-Driven Design: Tailoring the award around court outcomes reflects proactive risk management but also embeds complexity that shareholders must monitor. This is smart and a good recognition by the board that shareholders would rightly have concerns here.
Potential Impact on Shareholders
We see several items that shareholders will want to keep an eye in regarding the stock award.
- Dilution Considerations: 96 million shares represent roughly 1.7% of Tesla’s ~5.6 billion shares outstanding, which shareholders will have to decide whether that dilution relative to the benefits is worth it.
- Incentive Continuity: Will the awards ensure Musk retains meaningful equity stakes and therefore bolster his focus on hitting milestones that drive long-term value? This is a particularly important question considering Musk’s wide ranging responsibilities — Tesla, SpaceX, xAI / Twitter, The Boring Company, and, of late, politics.
- Monitoring Triggers: Investors will need to watch key litigation decisions regarding Tornetta and make sure there are no adjustments under the “No Double Dip” clauses that could unreasonably boost his stock compensation.
Our Take
It’s hard to argue that Musk is critical to the success of Tesla and that his continued focus — or a reinforced focus if you are a recent critic — is important for Tesla’s long-term success and ensuring shareholder return. To us, the 2025 CEO Interim Award represents a reasonable incentive structure: large enough to motivate Musk toward Tesla’s ambitious goals, yet constrained by reasonable governance and forfeiture mechanisms tied to litigation outcomes. For investors, the award balances dilution concerns with the necessity of maintaining Musk’s skin in the game through critical years of execution and innovation. But, we and shareholders won’t be able to reasonably assess until we see whether Musk and Tesla are able to re-energize growth of its cars, achieve a successful robotaxi service, and meet the other AI and related goals that currently make Tesla’s stock differentiated from legacy automakers.