Elon Musk has a big day coming. Shareholders vote on his massive $56 billion compensation package on June 13. A vote approving the package will end months of turmoil. A rejection will add more volatility to
stock.
Investors don’t have to worry too much about the latter, says Wedbush Dan Ives. He expects shareholder approval for Musk’s compensation. After the vote, Ives has some ideas about what Musk should do to further calm investors’ frayed nerves.
Musk’s incentive-laden 2018 pay package, worth about $56 billion at the time of the award, was voided by a Delaware judge in January. She cited inadequate disclosures made to investors. So Tesla put the old compensation package up for a new vote with added disclosures.
Final vote tallies will happen at Tesla’s annual shareholder meeting on June 13. The compensation package was approved with more than 70% support in 2018. What will happen in 2024 has been unnerving investors who want Musk to focus more on Tesla amid fierce EV competition.
“We would expect the 2018 package will be overwhelmingly approved,” wrote Ives in a Thursday report. ”This issue has been an overhang on Tesla’s stock and [it] will be important to move this distraction in the rearview mirror.”
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Approval looks like a reasonably safe bet.
analyst Adam Jonas recently surveyed his clients. More than two respondents expected approval for every one that expected shareholders to vote the package down. Barron’s asked more than a dozen investors and analysts about their views. A majority expect approval.
Musk will get his money, but investors will expect something in return: More engagement at Tesla.
The iconoclast CEO said earlier this year that he would be “uncomfortable” growing Tesla into an artificial intelligence and robotics leader without 25% voting control of Tesla stock. The 2018 pay package going back into effect gives him roughly 20%. (Musk would have close to 25% if he didn’t sell stock to buy his social-media platform X.)
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Regardless of the final voting control numbers, Ives says Musk must “recommit as CEO of Tesla for the next 3 to 5 years,” adding “autonomous and FSD is key to Tesla’s future and Musk needs to make this crystal clear at the shareholder meeting next week.”
FSD is short for Full Self Driving and is Tesla’s highest-level driver assistance product. Tesla trains its driver assistance technology using AI computing. AI helps the software get better faster and Musk believes it will one day turn Teslas into truly self-driving cars.
Coming into Friday trading, days ahead of the shareholder meeting, Telsa stock was down about 28% year to date. It isn’t all Musk. Slowing sales and lower earnings estimates have weighed on investor sentiment. Tesla delivered about 387,000 vehicles in the first quarter down almost 9% year over year. Partly as a result of lower deliveries, Wall Street expects Tesla to earn about $2.40 a share in 2024, according to FactSet. At the start of the year, that number was closer to $3.80.
Ives, for his part, rates Tesla shares Buy. His price target is $275 a share.
Overall, about 42% of analysts covering Tesla stock rate share Buy. The average Buy-rating ratio for stocks in the
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is about 55%, according to FactSet. The average analyst price target for Tesla stock is about $183 a share.
Tesla stock was down 0.3% in early trading Friday at $177.37, while S&P 500 and
futures were both down less than 0.1%.
Write to Al Root at allen.root@dowjones.com
