Tesla (TSLA) approves 96M share stock award for Musk

As previously disclosed in its quarterly report on Form 10-Q for the three months ended March 31, 2025, the board of directors (the “Board”) of Tesla (NASDAQ: TSLA)., a Texas corporation (the “Company”) established a special committee (the “Special Committee”) to consider certain compensation matters involving Elon Musk, the Company’s Chief Executive Officer. The Special Committee is comprised of disinterested directors Robyn Denholm and Kathleen Wilson-Thompson.

On August 3, 2025, the Company approved an award of 96 million shares of restricted stock (the “2025 CEO Interim Award”) to Mr. Musk under the Company’s 2019 Equity Incentive Plan (the “2019 Plan”). The shares underlying the 2025 CEO Interim Award will be issued upon termination or expiration of the waiting period or periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). The 2025 CEO Interim Award was recommended by the Special Committee on August 1, 2025, and approved by the Board, with Mr. Musk and Kimbal Musk recusing, on August 3, 2025.

The Company expects to account for the 2025 CEO Interim Award as a grant of restricted stock with a performance condition in accordance with ASC Topic 718, which for purposes of the 2025 CEO Interim Award is based upon the probability of certain conditions being met. Restricted stock with a performance condition is accounted for by recognizing compensation expense over the requisite service period, based on the accounting grant-date fair value, but only if and when the vesting of the award becomes probable. For accounting purposes, the accounting grant-date fair value of the 2025 CEO Interim Award will be determined on the date that the shares of restricted stock are delivered to Mr. Musk, which will be subject to the termination or expiration of the waiting period or periods under the HSR Act as described above. The accounting grant-date fair value is expected to be based upon the prevailing market price of the Company’s common stock on such date less the Purchase Price, adjusted to take into account an illiquidity discount due to the required holding period. The expense is adjusted for changes to the estimated likelihood of vesting based on the performance condition.

As of the date of this report, the Company expects that the performance condition of the 2025 CEO Interim Award will not be deemed to be probable of being met. As a result, the Company currently expects that it will not recognize a compensation expense upon the issuance of the award. However, the Company will reassess the probability of the performance condition being met at least quarterly. If the Company determines that it is probable that the performance condition will be met, at that date, the Company will record a cumulative catch-up expense based on the accounting grant-date fair value of the award (which reflects an illiquidity discount due to transfer and holding restrictions), ratably for the amount of time that has passed since the beginning of the two-year requisite service period and amounting to the remaining portion of the accounting grant-date fair value over the two-year requisite service period. If the performance condition remains not probable as of the end of the two-year requisite service period, such that the 2025 CEO Interim Award remains subject to forfeiture or cancellation, the Company may not recognize the compensation expense at such time. If, at any time following the two-year vesting period, the performance condition becomes probable, the Company will be required to recognize the related compensation expense at that time.

The Company is unable to predict whether a compensation expense will be recognized at any time during the two-year requisite service period, or thereafter.

For illustrative purposes only, if the approvals had been obtained on August 1, 2025, based on the closing stock price on such date, the accounting grant-date fair value of the 2025 CEO Interim Award would have been approximately $23.7 billion. This amount is based on such assumptions and is provided only for illustrative purposes. It does not reflect the accounting grant-date fair value of the 2025 CEO Interim Award that will be calculated in the future and disclosed in the Company’s future financial statements, nor is it indicative of the timing of recognizing any compensation expenses.

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