Delaware Court Reinstates Musk’s Landmark Compensation Package

A major legal cloud has been lifted for Tesla, even as the company navigates significant operational headwinds. The Delaware Supreme Court has reinstated CEO Elon Musk's controversial 2018 compensation plan, overturning a prior lower court decision that had voided the package. This judicial reversal removes a substantial overhang of legal uncertainty, though Tesla's business faces challenges from declining vehicle deliveries and contracting profit margins.

While the court ruling provides clarity on governance, Tesla's core automotive operations are under pressure. Delivery figures are projected to weaken considerably. Analysts at Deutsche Bank forecast that fourth-quarter 2025 deliveries will fall to approximately 405,000 vehicles. This represents a significant sequential and year-over-year decline:

• A 14% drop compared to the same period the previous year.
• A 19% decrease from the third quarter of 2025.
• Regionally, Europe and North America are expected to see the sharpest contractions at 34% and 33% respectively, with China projected to decline by 10%.

For the full year, market expert Edison Yu anticipates 1.62 million units delivered, which falls below the consensus estimate of 1.66 million and marks a 9% reduction from the prior year. Despite these softer delivery projections, Deutsche Bank analysts raised their price target on Tesla shares from $470 to $500, reiterating a buy recommendation.

Profitability Metrics Face Squeeze

The anticipated production slowdown is exerting pressure on the company's bottom line. Tesla's automotive gross margin, excluding regulatory credits, is expected to contract in Q4 2025. The forecast calls for a decline to 14.4%, a decrease of 100 basis points from the preceding quarter. This compression is largely attributed to poorer absorption of fixed costs across a lower volume of units produced.

Should investors sell immediately? Or is it worth buying Tesla?

A $139 Billion Reward for Musk Upheld

The court's decision fully restores what has become the most substantial executive compensation package in corporate history. Originally valued at $55 billion, the equity award has ballooned to an estimated $139 billion at current stock prices. In their ruling, the justices pointed to a procedural dilemma: while the original shareholder vote occurred under what were deemed "unfair" conditions, it could not be partially undone. This left the court with a binary choice—to void the entire package or uphold it entirely. The latter option was selected, accompanied by a nominal penalty of one dollar plus legal fees.

Existing shareholders will experience dilution of approximately 8% as a result of the package's reinstatement.

Future Growth Levers: Autonomous Driving and Battery Production

The company's long-term valuation thesis continues to hinge on advancements in autonomous technology. Tesla has progressed to testing vehicles without a safety driver in Austin, a critical milestone ahead of a broader commercial rollout. Sightings of the Cybercab prototype on public roads have been reported, which analysts interpret as a signal of an accelerated expansion for the robotaxi fleet in Austin and San Francisco.

On the manufacturing front, Tesla is making a strategic $1.2 billion investment in battery cell production at its German facility. The project aims to establish 8 GWh of capacity by 2027, a move designed to localize supply chains and enhance margin potential within the European market.