So some organization will still cough up the initial budget, and then some set of potential shareholders will decide that this project will be the first megaproject to run under budget. They'll then give the project more money, in exchange for getting that money back, plus whatever the project doesn't use out of their original budget?
I don't feel like incentives are aligned very well, here.
The organization sponsoring the project is going from the current situation where they can at least lie and pretend that the possibility exists that they'll come in underbudget, to one where they're guaranteed to burn >=100% of the budget if only because they've got to give away the leftovers at the end. In exchange they get maybe a few percent more budget. Do shareholders even get to elect the board of directors?
Middle managers on the project could now easily benefit financially by shorting the equities and sabotaging the project.
The sabotage issues that Tesla may be facing suggest you are right; that is a risk that will have to be assessed.
In my previous post on buying shares in a megaproject, several people asked the most reasonable of questions: how would the shares return value?
A simple description of shareholder value:
Assets - Liabilities = Equity
Basic project outcome:
Budget - Costs = Surplus
So the concept is fundamentally to treat the budget as the assets column, put the costs in the liability column, and treat every dollar you are under the budget as an increase in shareholder equity. At the conclusion of the project, the shares will be bought back for that surplus in cash.
This means the price the share sells for is a direct bet on how well the project will do against the budget.
This is analogous to how investors buy in to start-ups; the investment becomes the assets and in exchange they get a share of the equity. But in the case of megaprojects, the initial investor is getting the project outcome as compensation; the equity should instead go to management as their compensation. Now this gives management the incentive to be as efficient as possible, while also giving them the flexibility to raise more capital in exchange for equity.
For comparison with some of the ways this is currently done, consider the fixed-price contract and the cost-plus contract. The former gives the contractor an incentive to be efficient by forcing them to hold all the risk; the latter shifts the risk back to the contractee. Fixed-price is common for things that are predictable, like services; cost-plus is common for things that are risky or require R&D to complete, like defense procurement. Megaprojects are usually of the latter sort.
Tangential but worth also addressing: why a financial asset instead of a prediction market?