Elon Musk’s exorbitant $56 billion pay package is just one more reason why investors should steer clear of electric vehicle maker Tesla’s (NASDAQ:TSLA) stock. Executive compensation aside, Tesla stock continues to perform extremely poorly, down 32% in the last 12 months.
Analyst Charlie Billelo recently pointed out that Tesla stock has been in a drawdown for 952 days, the longest downturn since its IPO back in 2010. TSLA stock is currently trading 55% below its peak reached in November 2021.
Monstrous Pay Package
Shareholders recently voted 77% in favor of granting Elon Musk $56 billion in company stock.
The vote runs counter to both common sense and a court order earlier this year that had rescinded the lavish compensation awarded to Musk by Tesla’s board of directors, must of whom are friends of his and some of whom he reportedly does drugs with.
Elon Musk is already the world’s richest person with an estimated net worth of $210 billion.
Judge Kathaleen McCormick of Delaware called Musk’s compensation “unfathomable” and found that Tesla’s chummy board members do not act independently from Musk and are overly influenced and deferential to the CEO.
McCormick also noted that the pay package is the largest in corporate history and could harm both Tesla shareholders and the company’s finances should it be awarded.
The stockholder vote in support of Musk’s compensation doesn’t overturn the judge’s ruling. But it is seen as a vote of confidence in Musk and could aid his negotiations for future performance-based pay and if he decides to appeal Justice McCormick’s decision.
Slumping Sales and Aimless Direction
The question is whether Musk deserves anywhere close to his $56 billion compensation given the dreadful performance of Tesla stock and the company’s aimless direction.
Tesla’s most recent financial results were nothing short of a train wreck. Musk appears to be trying to steer the company away from its slumping electric vehicle business and into new areas that include supercomputers, robots and artificial intelligence.
There are even rumors that Tesla may launch a smartphone.
Tesla’s financial results for this year’s first quarter included EPS of 45 cents, which was below the 51 cents expected among analysts.
Revenue in the quarter totaled $21.30 billion, which fell short of the $22.15 billion forecast on Wall Street. Sales were down 9% from a year ago, the worst annual decline since 2012.
Tesla’s net income declined 55% from the previous year. Worse, Musk warned that Tesla’s growth moving forward might be “notably lower” than in 2023.
Sell Tesla Stock
Tesla has clearly lost its way. The company faces rising competition from other automakers and its electric vehicle sales are declining as a result.
Rather than double down and focus on EVs, Tesla is meandering into several unproven areas such as computing and robots where it is likely to spend billions of dollars before seeing any sales or profits.
Musk continues to act erratically and unpredictably as TSLA stock falls further. The $56 billion pay package awarded to Musk only adds insult to injury. Tesla stock is not a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
