Tesla, Inc. (NASDAQ:TSLA) is going through a fundamentally challenging phase, with industry-specific factors, macro environment and some strategic missteps serving as pushbacks. It now appears that CEO Elon Musk is toying with the idea of getting employees motivated with lucrative stock-based compensation awards.
What Happened: In a memo sent to Tesla employees on Monday, Musk said the company is considering paying stock-based compensation for high-performing employees, Reuters reported, citing people who had access to the internal memo.
Benzinga has reached out to Tesla for clarification and is awaiting a response from the company.
The Texas-based electric-vehicle maker reportedly skipped giving stock awards in 2023 as it navigated through inclement conditions. The company has been reporting earnings and revenue misses for three straight quarters now as demand faltered due to slowing EV adoption. Tesla did not do itself a favor by resorting to go with an attritional strategy of implementing price cuts for its vehicles.
This triggered a price war in the industry, hurting both established players and newbies. Tesla's core auto gross margin, excluding regulatory credit, took a hit from the price cuts, which in turn impacted profitability.
Why It's Important: Musk just got his $56 billion pay plan, which was nullified by a Delaware Chancery Court, reapproved by shareholders. The billionaire's 10-year award comprised 303 million stock options offered at a discounted price, and was made contingent on hitting 12 financial milestones.
Amid the fundamental woes, Tesla announced the elimination of 10% of its global workforce in April, with Musk reasoning that it was part of the company's strategy of reorganizing and streamlining the company for the next phase of growth. The layoffs included some high-profile executives such as Andrew Baglino, the then SVP, powertrain and energy engineering, Rebecca Tinucci, the then head of EV charging, and Daniel Ho, the then director of vehicle programs and new product introductions.
Tesla stock is among the worst-performing S&P 500 companies. It is now down about 25% even as the broader market traded at a record high.
In premarket on Tuesday, the stock fell 0.39% to $186.70, according to Benzinga Pro data.
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