Why Tesla Stock Has Soared This Week

Since the close of trading last Friday, shares of the electric carmaker Tesla (NASDAQ: TSLA) traded nearly 15% higher, as of 12:31 p.m. ET Thursday.

Tesla clearly joined the tech rally this week, sparked by a 90-day pause between the U.S. and China on elevated tariff rates, hopefully setting the stage for a larger agreement. There was also news related to CEO Elon Musk's pay package.

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Negotiating a new pay package for Musk

Tesla clearly benefits from a thawing of tensions between the U.S. and China because many parts needed to make Tesla's vehicles are sourced in China. The company also has one of its large factories in China and sells many Teslas in the country.

Image source: Getty Images.

But other news that may be positively influencing the stock could be related to Musk's pay package. The Financial Times recently reported that the board of directors at Tesla has established a "special committee" to look into a new pay package for Musk.

On two occasions now, a Delaware court has prevented Musk from receiving a whopping $55.8 billion executive comp package approved by Tesla's board. Not all shareholders were in favor, however, and a Delaware Court of Chancery ultimately ruled that the package would have violated fiduciary duties of Musk and the board. The court ultimately prevented the payout.

Musk has expressed his displeasure about not being paid in the past, so a new pay package may be able to correct the matter.

Despite recent criticism, the majority of shareholders seem to approve of Musk

Musk has been widely criticized this year due to his involvement with the Department of Government Efficiency (DOGE), which some believe has had a negative impact on Tesla's core EV business. However, when a Wall Street Journal report earlier this year suggested Tesla's board was potentially looking for Musk's replacement, Tesla's stock fell.

Despite troubles this year, Musk has a massive following and has managed to drive Tesla's valuation to meteoric levels on the belief that future initiatives like full-self driving tech and robotics are the future. The stock is personally too richly valued for me, but would it trade at the same multiple without Musk? That's certainly a worthwhile question.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.