Investing.com -- Morgan Stanley analysts weighed in on the Delaware Chancery Court's decision to strike down Elon Musk’s controversial 2018 Tesla (NASDAQ:TSLA) pay package in a note Tuesday.
The rejected package, previously approved by shareholder supermajorities, included options now worth over $100 billion. Tesla plans to appeal the ruling, likely prolonging the process.
According to Morgan Stanley (NYSE:MS), the appeal to the Delaware Supreme Court could take up to a year, but the firm might also consider proposing a new pay package.
The bank’s analysts caution that such a package would “likely be far more expensive” given Tesla's stock price is currently 15 times higher than the original option exercise price.
The issue of Musk’s control at Tesla is also a factor, says Morgan Stanley. They note that unlike his other companies—SpaceX and xAI—Musk lacks control or a blocking minority vote at Tesla.
Morgan Stanley highlights Musk's concerns about advancing Tesla's AI initiatives without sufficient control. Musk has stated he would prefer to hold around 25% voting power, especially in scenarios where AI technology might "go awry."
Even a successful appeal would not address Musk’s goal of achieving this voting threshold. To close the gap, Morgan Stanley notes that Musk could pursue additional share purchases or alternative mechanisms, leveraging his substantial assets outside of Tesla, including stakes in SpaceX and xAI.
While the ruling introduces near-term uncertainty, analysts view the impact on Tesla’s stock as “modestly negative,” particularly given the recent doubling of Tesla’s share price in six months.
For long-term investors, Morgan Stanley believes the focus will shift back to Tesla's business fundamentals.
They conclude that the broader concern revolves around control rather than capital, suggesting multiple potential paths for Musk to navigate this challenge.