Cathie Wood, the founder of Ark Investment Management, has praised Elon Musk‘s dedication to Tesla Inc. (NASDAQ:TSLA) shareholders. She also asked how the shareholders could “renege on his pay package” after he overcame the risks associated with “Tesla's rise to producing the top-selling car in the world.”
What Happened: On Thursday, Wood took to X, formerly Twitter, and expressed her admiration for Musk’s shareholder alignment. “I'd argue that no other executive is as aligned with shareholders as Elon Musk, who committed to no salary, no bonus, no stock comp FOR 10 YEARS, unless he created tremendous value for Tesla shareholders.”
She went on to highlight Musk’s unique compensation package, which prevents him from cashing in on his options until five years after exercising them. This arrangement has seen Musk working without compensation since 2018.
Despite initial skepticism about Musk’s ability to meet his compensation package goals, Wood pointed out that Tesla’s performance has exceeded expectations.
“Tesla shot up to ~$414 as Tesla hit the milestones in Musk's pay package: compounding revenues at a 49% annual growth rate, adj-EBITDA 142%, and market cap 91% from Q1'18 to Q2'22. Even after soaring interest rates and a Chinese price war, TSLA is still at $179,” she said.
Wood also compared Tesla’s spending habits to other auto manufacturers. She noted that while General Motors (NYSE: GM) and Dearborn-based Ford Motor Co (NYSE:F) each spent $4 billion on ads in 2018, Tesla spent nothing on advertising during the same period.
She concluded her post by warning that if shareholders renege on Musk’s pay package, the public equity market could lose access to one of the most innovative companies in the world.
“If shareholders renege on Elon's pay package after 73% voted for it in 2018, the public equity market will lose access to one of the most innovative companies in the world, depriving retail investors.”
Why It Matters: The praise from Wood comes amidst ongoing scrutiny over Musk’s substantial $56 billion compensation package. Previously, billionaire investor Ron Baron expressed strong backing for Musk’s compensation package, saying that without the tech mogul’s unparalleled commitment and exacting standards, Tesla would not exist as it does today.
Tesla board chair Robyn Denholm has warned that not approving Musk’s pay package could risk driving the billionaire CEO to greener pastures.
Earlier this month, Tesla defended Musk’s pay package, asserting that a new compensation structure would be even more expensive. This defense came after a prominent proxy advisory firm urged shareholders to vote against the proposal.
Tesla shareholders will decide the fate of Musk's compensation package for the second time on June 13, after a Delaware judge voided the first one earlier this year on the grounds that the approval process was “deeply flawed.”
Photo via WEF on Flickr
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