Prominent investor Ross Gerber from Gerber Kawasaki has issued a caution to shareholders of Tesla Inc. (NASDAQ: TSLA) concerning the effects of stock-based employee compensation, drawing parallels with Meta Platforms Inc.'s (NASDAQ: META) notable share repurchase activities.
Gerber, utilizing the social media platform X, underscored that stock compensation represents a tangible cost for corporations. He referenced a Wall Street Journal report, noting that Meta had allocated approximately $23.6 billion towards share repurchases to counteract dilution. Share repurchases can significantly impact stock valuation, as they reduce the total number of shares in circulation, thereby increasing the value of existing shares. This practice helps to offset the dilutive effect of employee stock options, which can devalue current shares by increasing the overall share count. The report further detailed that Tesla had set aside nearly 60 million shares for its employees, alongside a substantial 208 million shares designated for CEO Elon Musk. According to a December 30, 2025, SEC filing, Musk's holdings in the electric vehicle manufacturer exceeded 519 million shares, contrasting with the company's over 3.7 billion outstanding shares. Tesla has shown strong performance in momentum metrics and maintains a positive long-term price trend.
Musk's ambitious compensation package, previously critiqued by Gerber for its potential to cause significant stock dilution—estimated at $275 million daily if all milestones are met—is also a key factor. This package is contingent on Musk achieving specific performance targets for Tesla, including reaching 10 million active Full Self-Driving subscriptions, delivering 20 million Tesla vehicles, and deploying 1 million Optimus bots and 1 million Robotaxis commercially. Despite the concerns, Tesla's stock experienced a slight dip of 2.91% to $399.83 at Monday's market close, followed by a marginal rise of 0.19% to $400.57 in overnight trading.
Understanding the intricacies of stock-based compensation and its potential for dilution is crucial for investors. Companies, while incentivizing employees and executives, must carefully balance these benefits against the impact on shareholder value. Transparent communication and strategic financial management are key to maintaining investor confidence and ensuring sustainable growth. Engaging in informed decision-making, based on thorough analysis of company financials and market dynamics, empowers investors to navigate the complexities of today's financial landscape with greater foresight.