Elon Musk's $56bn Tesla pay deal rebuffed again by US judge

A judge has ruled that Tesla boss Elon Musk is still not entitled to receive a $56bn compensation package despite shareholders of the electric vehicle giant approving the pay deal six months ago.

It is the second time the pay deal has been rejected, with judge Kathaleen McCormick upholding her January decision, in which she ruled that Tesla's board members were too heavily influenced by the billionaire.

Musk’s brother sits on the board, as does his close personal friend James Murdoch, son of media tycoon Rupert Murdoch. Another board member, Antonio Gracias, regularly holidays with Musk.

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In response to the ruling Musk wrote on X: “Shareholders should control company votes, not judges."

Delaware-based Tesla said it would appeal against the decision. “This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners — the shareholders,” the company said.

What other headwinds is Tesla facing?

The outcome of the US election has been good for Tesla. Musk's close ties to president-elect Donald Trump have seen the company's share price rise almost 40% since votes were cast. The view is a change of government in the US could make regulatory approval less arduous for Tesla’s autonomous robotaxi service.

Having said that, Tesla is currently in a period of reset after emerging from several years of stratospheric growth. “Our company is currently between two major growth waves,” Tesla wrote in its latest investor report. “The first one began with the global expansion of the Model 3/Y platform and we believe the next one will be initiated by advances in autonomy and the introduction of new products.”

The company has also run into additional challenges recently. Firstly, consumers are being squeezed by inflation and higher interest rates. This is impacting sales for many businesses – but those which produce high value items like electric cars are often hit particularly hard in periods like this. E-vehicles come at a premium, and Teslas are more expensive than most. When households tighten their purse strings, luxury items are often the first thing to go.

The company has also faced increased competition in the key market of China. The Chinese economy has been going through a tough period, and continues to suffer a property market crisis and weak spending. Against this backdrop, more affordable domestic brands can seem more appealing. On top of this, “anti-American sentiment” has taken its toll, according to Danni Hewson, head of financial analysis at AJ Bell.

Despite this, some better news materialised on 9 October when Tesla reported record third-quarter shipments from its Shanghai factory in China. The shipments were up 19% year-on-year.

Should you invest in Tesla?

It has been a mixed year for Tesla overall, with a distinct lack of consistency, although the last few weeks have seen considerable share-price growth for the company. The outcome of the US election could change the fortunes for the firm but traditional metrics will still be key.

Investors will be keeping a close eye on the company as it releases its financial results in upcoming quarters. Production and delivery numbers will be in focus too.

Longer term, the company has been clear that it believes its next growth wave will come from “advances in autonomy and the introduction of new products”.

On the first point, there is still a fair amount of scepticism in the market about Musk’s push to develop a robotaxi service – not least because of regulatory and safety concerns. But on the second point, it will be interesting to see how much demand there is for the cheaper EV models that have been promised in 2025.

In response to Tesla’s strong third-quarter results, Morningstar analysts upgraded their fair value estimate from $200 to $210 per share. But much has changed since then with Tesla's shares now trading at around $350, proving investors are much more optimistic about the company's prospects with Trump in charge of the US.