Musk exercises his 2018 pay package, Sweden formally recommends the EU reject FSD, Wolfe estimates Q2 gross margin
Three main threads are running in parallel. (1) Governance: Musk exercised all the options in his 2018 pay package in one go (304 million shares at $23.34 each, a paper gain of about $116 billion). His voting power rises to about 20%.
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Control is now highly concentrated and resistance to a SpaceX-Tesla merger is lower, but worries about a governance discount are deepening. The new shares are locked up until 19 Jan 2028, so there is no near-term selling pressure, but the dilution has to show up in the share count. (2) Regulation: Sweden's TRV has formally recommended that the EU reject FSD (the sticking point is a feature that 'can deliberately exceed the speed limit'). The challenge has escalated from doubts about 'how the data are measured' to 'the product feature itself breaking the rules'. The TCMV meets on 30 Jun to discuss it (no vote that day). Add the US senators' 7 Jul deadline for NHTSA, and FSD's regulatory exposure is the most certain negative variable right now. (3) Fundamentals: Wolfe Research has given the first estimate of the key Q2 gross margin measure. Auto gross margin excluding regulatory credits is in the low 18% range (above last quarter's 17.7%), with EPS of $0.50-0.52 and deliveries of about 420,000. That answers the doubts about 'gross margin quality' head-on. Goldman Sachs also raised its Q2 delivery forecast to 420,000 the same day. If this holds, the delivery beat was not simply volume bought by sacrificing margin, and it is a double positive for deliveries and earnings quality. The next test is Q2 earnings on 22 Jul.
Key evidence
- Musk exercised all the options in his 2018 CEO pay package, acquiring 303,960,630 shares at $23.34 each, for a paper gain of about $116 billion (SEC Form 4, executed on 16 Jun)
- After the exercise, Musk's stake in Tesla rises to about 19.9% and his voting power nears 20%. The new shares are restricted and are not released until 19 Jan 2028.
- Tesla has moved from Delaware to Texas, where the bar for shareholder lawsuits is higher. Together with the concentrated voting power, that clears the way for a SpaceX-Tesla merger.
- The Swedish Transport Administration (TRV) has formally recommended that the EU reject FSD (Reuters exclusive, 18 Jun) unless Tesla disables a feature that 'can deliberately exceed the speed limit'
- The EU's TCMV committee meets on 30 Jun to discuss approval of supervised FSD, but is not expected to vote that day
- Wolfe Research analyst Emmanuel Rosner forecasts Q2 global deliveries of about 420,000 (+10% year on year, ahead of consensus of about 400,000)
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- Wolfe puts Q2 auto gross margin excluding regulatory credits in the low 18% range (above last quarter's 17.7%), with EPS of $0.50-0.52
- Goldman Sachs raised its Q2 delivery forecast to 420,000 on the same day (17-18 Jun)
- On 18 Jun TSLA fell about 2.2% intraday to $387.74 on the FSD regulatory news, with key support at $377.66 and resistance at $406.88. It rebounded to about $398 on Thursday. YTD about -7% to -10%.
Catalysts to watch
- 30 Jun: the EU TCMV committee meets to discuss approval of supervised FSD (no vote that day, but it will slow things down)
- 7 Jul: deadline for NHTSA to respond to the US senators' letter (regulators on two continents closing in)
- 22 Jul Q2 earnings: a test of the 420,000 deliveries forecast by Wolfe and Goldman Sachs and of the low-18% auto gross margin
Risks
- FSD's timetable for commercialisation in Europe faces real delays. Regulatory exposure is the most certain negative variable right now.
- Musk's voting power rises to 20%, deepening worries about a governance discount, with 'personal will overriding governance'
- The dilution from exercising the pay package has to show up in the share count later
- Wolfe and Goldman Sachs are still only sell-side models. The real test is the 22 Jul earnings.
- Broke below key moving averages on 18 Jun, so the technical picture is weak in the short term
Sources (4)
- SEC Form 4 (executed 16 Jun, newly disclosed)
- Reuters (exclusive, 18 Jun): Sweden's TRV formally recommends that the EU reject FSD
- Wolfe Research, Emmanuel Rosner (17-18 Jun)
- Goldman Sachs (17-18 Jun)
A brief is a lead for our research, not a verified conclusion or advice.