Morgan Stanley discusses Tesla after 2nd rejection of Musk pay package deal

Investing.com — Morgan Stanley analysts weighed in on the Delaware Chancery Court docket’s choice to strike down Elon Musk’s controversial 2018 Tesla (NASDAQ:TSLA) pay package deal in a notice Tuesday.

The rejected package deal, beforehand authorized by shareholder supermajorities, included choices now price over $100 billion. Tesla plans to enchantment the ruling, probably prolonging the method.

In line with Morgan Stanley (NYSE:MS), the enchantment to the Delaware Supreme Court docket might take as much as a yr, however the agency may additionally think about proposing a brand new pay package deal. 

The financial institution’s analysts warning that such a package deal would “probably be far costlier” given Tesla’s inventory worth is at present 15 occasions increased than the unique possibility train worth.

The problem of Musk’s management at Tesla can also be an element, says Morgan Stanley. They notice that not like his different firms—SpaceX and xAI—Musk lacks management or a blocking minority vote at Tesla. 

Morgan Stanley highlights Musk’s considerations about advancing Tesla’s AI initiatives with out ample management. Musk has said he would favor to carry round 25% voting energy, particularly in eventualities the place AI expertise may “go awry.”

Even a profitable enchantment wouldn’t deal with Musk’s purpose of attaining this voting threshold. To shut the hole, Morgan Stanley notes that Musk might pursue extra share purchases or different mechanisms, leveraging his substantial property outdoors of Tesla, together with stakes in SpaceX and xAI.

Whereas the ruling introduces near-term uncertainty, analysts view the influence on Tesla’s inventory as “modestly destructive,” notably given the current doubling of Tesla’s share worth in six months.

For long-term traders, Morgan Stanley believes the main focus will shift again to Tesla’s enterprise fundamentals. 

They conclude that the broader concern revolves round management quite than capital, suggesting a number of potential paths for Musk to navigate this problem.