Tesla’s stock dipped on Friday morning, even after shareholders overwhelmingly approved CEO Elon Musk’s record-breaking $1 trillion compensation package.
Shares fell 5.04% to $423.40 although they have recovered to $429.44 at the time of writing, still down 3.69%.
The market reaction may seem counterintuitive given the resounding vote of confidence in Musk’s leadership.
However, analysts note that the decline likely reflects a “buy the rumor, sell the news” dynamic, a common pattern when investors preemptively price in expected outcomes.
Shareholders approve record pay package
At Tesla’s annual meeting on Thursday, roughly 75% of votes cast supported Musk’s massive equity-based pay package, according to company chair Robyn Denholm.
The plan, entirely structured through stock awards, could increase Musk’s ownership by 12% if Tesla meets a series of ambitious performance targets.
To unlock the full value, Musk must drive Tesla’s market capitalization to $8.5 trillion, grow annual earnings 24-fold to $400 billion, and expand into new areas such as robotics and self-driving technology.
Denholm praised Musk’s track record of achieving the improbable, calling his continued involvement “vital” as Tesla transitions from an automaker to a broader artificial intelligence and industrial automation leader.
High-profile investors, including Ron Baron and Cathie Wood, publicly backed the package.
Baron described the payout as extreme but justified, noting that “so are the results Tesla has delivered under Musk’s vision.”
The vote marked a sharp turnaround for Musk, who faced months of criticism from governance groups and institutional investors over the deal’s scale and potential dilution.
The approval cements his control over the company and reaffirms shareholder confidence in his leadership as Tesla enters its next phase of innovation.
Dissent from major institutions
Despite the strong approval, some major investors voiced opposition.
Norway’s $2.1 trillion sovereign wealth fund, Tesla’s seventh-largest shareholder, voted against the plan, citing concerns about the “total size of the award, dilution, and lack of mitigation of key person risk.”
Proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis also recommended voting against the proposal, calling its magnitude “striking” and questioning whether Musk can effectively focus on Tesla given his commitments to SpaceX, X (formerly Twitter), and xAI.
Their objections highlight ongoing governance concerns about Tesla’s dependence on Musk’s leadership.
However, many investors viewed Musk’s warning that he might step back from Tesla if the package was rejected as too great a risk to ignore.
Focus turns to AI and long-term growth
With the pay package drama behind it, analysts say Tesla’s narrative is shifting toward its AI and automation ambitions.
Wedbush analyst Dan Ives described Musk as a “wartime CEO” leading Tesla into the “AI Revolution.”
He remains one of the most bullish voices on Wall Street, maintaining a Buy rating and a $600 price target, compared with the FactSet average of about $400.
Ives believes Tesla’s push into AI-driven self-driving cars and robotics could spark a new era of growth and profitability.
Yet, for now, the market remains cautious.
Friday’s decline suggests investors are waiting for concrete signs that these next-generation technologies will translate into sustained earnings momentum.
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