Musk’s Net Worth Drops $10 Billion—And Tesla Shares Fall—Here’s Why

On Friday, Tesla shares slid after investors ratified an ambitious compensation plan for CEO Elon Musk, wiping about $10 billion (roughly 2%) off his estimated net worth. The stock fell about 3.6% to approximately $429.70 after a 3.5% decline on Thursday, continuing a two-day retreat that coincided with the shareholder vote. More than three-quarters of shareholders approved a package that could grant Musk roughly 423 million additional shares and, if targets are met, raise his stake toward 25%. The vote and the market’s reaction underlined investor divisions over a proposal some call historic and others call excessive.

Key Takeaways

• Tesla shares fell 3.6% to about $429.70 on Friday, following a 3.5% decline the previous day.
• More than 75% of Tesla shareholders voted to approve a compensation package for Elon Musk that could be worth up to $1 trillion if milestones are met.
• The plan would award Musk an additional ~423 million shares and could increase his ownership to roughly 25% if targets are reached over the next decade.
• Milestones include an $8.5 trillion Tesla market capitalization target and selling 12 million additional vehicles, among other operational and market goals.
• Forbes estimates Musk’s net worth at $481.4 billion after a $10 billion decline; several other billionaires also saw notable paper losses.
• Analysts are split: some call the targets “Everest-sized” and unlikely, while others say shareholders risk little in approving long-shot incentives.

Background

Tesla’s compensation vote comes after years of meteoric gains in the company’s share price that dramatically increased the paper wealth of its largest shareholders and executives. The automaker’s recent surge pushed Elon Musk past several peers to become the world’s richest person earlier in the year, and proposals tying pay to future performance have been part of long-running governance debates. Large equity holders and proxy advisory firms have alternately supported and criticized outsized pay packages tied to equity milestones, citing alignment with shareholder value on one side and governance and dilution concerns on the other. The plan approved at the recent meeting assembles a complex slate of market-cap and delivery-related targets spanning roughly a decade, reflecting management’s long-term growth assumptions.

Shareholder composition played a direct role in the outcome: institutional investors, retail holders and index funds together shaped a margin that cleared the proposal. Some major shareholders publicly opposed the deal, citing governance principles and potential dilution; others assessed the milestones as so difficult that approval carried little immediate cost. Corporate governance norms in the U.S. permit wide latitude in structuring executive pay, provided shareholders assent, which is what occurred here. That mix of regulatory permissiveness and shareholder deference set the stage for the vote and the market’s subsequent reassessment.

Main Event

The company’s shareholder meeting concluded with a large majority backing the compensation package, which ties awards to ambitious targets including an $8.5 trillion market capitalization and a tenfold-plus increase in vehicle deliveries relative to recent annual totals. The plan’s mechanics would deliver more than 423 million new shares to Musk if Tesla meets a sequence of market and operational milestones over the next decade. Management framed the package as an extraordinary incentive intended to drive long-term value creation, while opponents argued it creates an outsized potential payout with significant dilution risk for current holders.

Trading reacted immediately: Tesla shares lost roughly 3.6% on Friday afternoon, erasing billions in market value and knocking about $10 billion off Musk’s Forbes-estimated net worth of $481.4 billion. The stock’s two-day decline followed a day of heavy discussion and media scrutiny ahead of the vote, as analysts and large investors evaluated the probability of the company hitting the plan’s targets. Market commentary emphasized that most payouts would occur only if Tesla achieves what many describe as near-impossible benchmarks, a feature supporters point to in defending the package.

Opposition from some prominent holders illustrated the governance tension: New York City Comptroller oversight for municipal pensions criticized the board’s decision as rewarding management excessively, while other investors signaled that backing the plan posed little short-term downside given the low near-term probability of full achievement. Analysts offered divergent takes: some called the targets unrealistic but conceded that Musk earns nothing unless Tesla creates extraordinary value; others framed the vote as shareholders choosing to back an aggressive growth bet with asymmetric upside for the CEO.

Analysis & Implications

At its core, the package links an enormous theoretical payout to a sequence of high bars. If Tesla truly reached an $8.5 trillion market capitalization and sold an additional 12 million cars, shareholder value would have to expand manyfold; that prospect underpins arguments that the deal is effectively performance-based rather than an immediate windfall. For critics, however, the existence of such a large conditional award raises questions about board independence and dilution risk: even unlikely payouts can meaningfully reshape incentive structures and corporate governance norms if partially achieved.

The market’s swift negative reaction suggests investors weighed short-term governance concerns alongside long-term feasibility. A roughly 3.6% decline in share price translates into meaningful market-cap contraction and reduces the paper wealth of major holders, showing how governance decisions can trigger instantaneous market repricing when they alter perceived alignment between management and shareholders. For active investors, the episode may prompt renewed scrutiny of board composition and future proposals linking executive compensation to volatile market metrics.

On a broader level, the vote may set precedent. If other firms observe that such large, milestone-tied packages can clear shareholder approval, similar structures could appear elsewhere, especially at firms with charismatic founders and concentrated voting blocs. Regulators and proxy advisors may respond with tighter scrutiny or new guidance, while institutional investors may revise engagement strategies to demand clearer safeguards against excessive dilution. International investors will watch whether U.S.-style governance practices allow outsized conditional awards to proliferate in global markets.

Comparison & Data

The table above summarizes the numerical contours of the vote and market reaction. The compensation plan’s headline $1 trillion potential is a theoretical maximum contingent on multi-year achievements; actual payouts, if any, would scale with the degree to which milestones are met. The immediate market reaction reduced equity valuations and re-ranked short-term wealth changes among major billionaires, but long-term effects depend entirely on Tesla’s operational performance and macro market conditions over the next decade.

Reactions & Quotes

“The package is outrageous and the milestones are Everest-sized — he earns nothing unless he creates staggering value,”

Matt Britzman, Hargreaves Lansdown (market analyst, quoted in Reuters)

Britzman’s comment encapsulates one common analyst view: the plan’s goals are so large that they protect shareholders unless exceptional value is created. Other industry voices noted practical reasons shareholders may have favored approval given the low near-term probability of full achievement.

“A crony board has awarded the ransom Musk wanted, and now shareholders are on the hook,”

Brad Lander, New York City Comptroller (pension overseer)

Comptroller Lander’s statement represents the governance pushback centered on fiduciary responsibility and public pension exposure to large compensation votes. Municipal and public-fund trustees often emphasize governance standards even when probability-weighted dilution is low.

Unconfirmed

• Whether any portion of the approved package will vest in the next three years is unclear and depends on performance that remains speculative.
• Exact scenarios for partial vesting and the scale of potential dilution under intermediate outcomes are not publicly detailed in full at the time of writing.
• Market assumptions about Tesla reaching an $8.5 trillion market cap reflect optimistic projections; there is no consensus forecast supporting that specific valuation.

Bottom Line

The shareholder approval makes clear that, for now, a broad swath of investors are willing to accept an extremely high upside tied to extraordinarily difficult targets rather than reject the package outright. The market’s immediate response — a roughly 3.6% share price decline and a $10 billion drop in Elon Musk’s estimated net worth — shows investors reassessing governance trade-offs and near-term dilution risks. Whether the package proves to be a prudent long-term incentive or a governance misstep will depend entirely on Tesla’s ability to execute at a scale few currently expect.

Investors, regulators and governance watchdogs are likely to watch subsequent disclosures and any future proposals closely; this vote could influence how other companies design founder-linked pay over the coming years. For shareholders and observers, the key questions remain whether Tesla can meet the plan’s benchmarks and how partial achievements would affect equity ownership and corporate control.

Sources

• Forbes (news report)
• Tesla Investor Relations (official company investor materials)