Tesla (TSLA) Stock: November Losses Mount for Retail Investors as Legal Battle Looms

TLDR

• Tesla stock dropped 13% in November through Thursday, while retail investors bought shares during the decline
• The company faces a potential $26 billion profit hit if it loses its appeal over Elon Musk’s 2018 compensation package
• Tesla traded down 2% year to date through Friday, compared to being up 84% from its April 52-week low
• Retail investors piled into Tesla and other tech stocks this week before markets reversed course on Thursday
• The Delaware Supreme Court will soon rule on whether to uphold the cancellation of Musk’s previous pay package

Tesla shares continued their difficult November as retail investors who bought the dip faced losses following Thursday’s market reversal. The stock closed at $395.04 on Thursday, down 2.2% for the day.

Tesla, Inc., TSLA

Coming into Friday trading, Tesla was down roughly 2% year to date. Over the past 12 months, shares gained about 16%.

JPMorgan strategist Arun Jain noted that retail investors rotated money into Tesla this week. They moved funds out of healthcare, industrials, and staples sectors. The strategy of buying dips has worked well in 2025 until recently.

Tesla stock traded as high as $428.94 on Thursday before sliding to close near $395. The decline left shares down about 13% for November through Thursday’s session.

Retail investors were also buying Nvidia stock throughout the week ahead of its earnings report. Both stocks fell despite Nvidia posting stronger-than-expected results Wednesday evening.

Compensation Package Creates Profit Uncertainty

Tesla faces a larger financial challenge beyond recent stock movements. The Delaware Supreme Court will soon decide whether to reverse a lower court ruling that invalidated Musk’s 2018 compensation package.

If Tesla loses the appeal, the company could see a $26 billion hit to profits over two years. This relates to the replacement stock compensation package promised to Musk at today’s higher stock price.

For context, $26 billion represents more than half of Tesla’s total net income since 2019. The company became profitable that year.

The replacement package was valued at $26 billion when the board granted it in August. Tesla would need to book this charge by August 2027 when Musk becomes eligible to collect the shares.

Dividing $26 billion over eight quarters equals $3.25 billion per quarter. This exceeds Tesla’s net income for all but four of the last 25 quarters dating back to 2019.

Board Argues Pay Tied to Performance

Tesla’s board maintains that Musk’s compensation gives him nothing unless the company hits specific milestones. These include lofty profit goals the board describes as transformative.

A Delaware judge ruled last year that Musk’s pay negotiations were compromised. The judge cited excessive pay for board members and their close personal ties to Musk.

If the Delaware Supreme Court sides with Tesla, Musk keeps the stock options from the 2018 package. The company would incur no additional accounting expenses. Those options are currently worth $116 billion.

The stock compensation doesn’t require cash payment. Tesla can issue new shares instead. However, accounting rules require booking stock compensation as an expense.

Brian Dunn from Cornell University’s Institute for Compensation Studies said huge net income declines from CEO compensation signal the board isn’t following reasonable practices. He called it a massive transfer of wealth from shareholders to the single largest shareholder.

Tesla stock trades for roughly 180 times estimated 2026 earnings. This compares to about 25 times earnings for companies like Amazon, Microsoft, Alphabet, and Meta Platforms.

Earnings from Tesla’s AI-trained self-driving cars and robots haven’t materialized yet. The company currently faces declining earnings from falling car sales and disappearing electric vehicle subsidies.

Tesla disclosed in a filing that a failed appeal could cause a material impact on its business and reported earnings. The board argued that failing to replace the 2018 package could cause Musk to leave Tesla.

The company reported that if Musk hits performance goals in his newer compensation plan, profits could be squeezed over the next decade. Each goal would trigger billions in payouts and accounting expenses.

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