Tesla (TSLA) Chief Executive Elon Musk claimed over the weekend that the vast majority of Tesla retail investors who have voted in the run-up to the annual shareholder meeting on Thursday, support two key measures, including reapproving his 2018 $56 billion compensation deal. TSLA shares angled lower Monday.
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Musk posted to X Saturday that around “90% of retail shareholders” who have voted thus far support awarding him his pay package and reincorporating Tesla in Texas. Tesla has been incorporated in Delaware since 2003.
“The public sentiment is unequivocally supportive,” Musk said Saturday.
Retail, or individual investors, currently own around 40% of Tesla shares. Institutional investors hold a much-larger share of Tesla stock than they did in 2018. Vanguard voted against the Musk pay package in 2018, while BlackRock and many others supported it.
The Tesla chief was writing on Saturday in response to news that Norway’s sovereign wealth fund, which manages around $1.7 trillion in assets, has voted against Musk’s 2018 pay deal. This is the latest institutional investor that has decided not to support measure ahead of Thursday’s meeting.
“While we appreciate the significant value generated under Mr. Musk’s leadership since the grant date in 2018, we remain concerned about the total size of the award, the structure given performance triggers, dilution, and lack of mitigation of key person risk,” Norges Bank Investment Management, the official name of the fund, said in a statement on its website.
Norges Bank Investment Management owns nearly 1% of TSLA shares. The sovereign wealth fund added that its decision is “consistent with our vote on the same award in 2018.”
“We will continue to seek constructive dialogue with Tesla on this and other topics,” the fund added.
Musk responded Saturday saying “this is not cool.”
Voting Ahead Of Shareholder Meeting
Since Tesla on April 17 requested shareholders ratify Musk’s 2018 pay package despite a Delaware court voiding the plan earlier this year, the EV giant has been attempting to drum up votes of its retail investor base. Musk’s compensation deal is currently valued at around $45 billion.
The vote comes after a Delaware judge ruled against the 2018 package, deciding that the package was excessive and unfair to Tesla investors. The judge criticized Musk’s “extensive ties” with Tesla board members.
Tesla shareholders are also voting on whether to incorporate Tesla in Texas, moving from Delaware.
The vote on Musk’s compensation requires a simple majority of votes, excluding those owned by Musk and his brother, Kimbal Musk. Meanwhile, the vote to reincorporate Tesla in Texas necessitates a majority of all shares outstanding, with any uncast votes counted as “no.”
Voting has been open for the past several weeks. The Tesla board has recommended “yes” votes on both reincorporating in Texas and Musk’s pay.
All Tesla stockholders can vote in Tesla’s annual meeting with a deadline of 11:59 p.m. Eastern Standard Time on June 12. Registered stockholders may also vote at the virtual annual meeting.
In 2018, the Tesla board won approval for Musk’s 2018 pay package with 73% of the vote.
Tesla Stock: Keeping Elon Musk ‘Motivated’
Last week, Tesla Board Chair Robyn Denholm sent a letter to shareholders imploring investors to give Musk his 2018 pay deal.
“If Tesla is to retain Elon’s attention and motivate him to continue to devote his time, energy, ambition and vision to deliver comparable results in the future, we must stand by our deal,” Denholm wrote to shareholders Wednesday.
Denholm added that with Musk being one of the richest people in the world, the deal is “obviously not about the money.”
“Motivating someone like Elon requires something different,” she wrote. “This is one of the key reasons the award also requires Elon to hold any shares he receives upon exercise of stock options for five years after he exercises the options — which can only serve to incentivize him to continue delivering value to Tesla and our stockholders.”
Musk And Tesla Control
CNBC reported on June 4 that in December Musk had Nvidia (NVDA) send AI processors, earmarked for the EV giant, instead to his social media enterprise X, formerly Twitter, which Musk purchased in October 2022.
Musk has hinted throughout the year he feels he needs more TSLA shares and voting power before making Tesla a “leader in AI & robotics.”
In January, Musk posted on X that he’s “uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control.” The chief executive added that he wants enough shares to be “influential but not so much that I can’t be overturned.”
“This is primarily about ensuring the right amount of voting influence at Tesla,” Musk said. “At 15% or lower the for/against ratio to override me makes a taker by dubious interests too easy.”
Adam Jonas, Morgan Stanley’s high-profile autos analyst and a Tesla bull, wrote on June 4 that if Musk does not achieve a 25% voting stake in the EV giant, “Tesla shareholders should be prepared for Tesla to significantly slow down/curtail its direct investment in sensitive/advanced AI efforts.”
“While Tesla may still be in position to benefit indirectly from AI advancements, we believe that most of the adjacent AI efforts could be concentrated within non-Tesla entities where Elon Musk has control,” Jonas added.
Musk currently has a nearly 13% stake in Tesla. Prior to selling TSLA shares to purchase Twitter, now X, for $44 billion in late 2022, Musk owned around 22% of Tesla.
The Legal Situation
Meanwhile, it’s still unclear how the Delaware court could respond if the pay deal is reapproved.
The judge has scheduled a July 8 hearing to decide whether lawyers for the Tesla shareholder who brought the case against Tesla will receive $6 billion in TSLA shares as a legal fee.
After that hearing, Musk can request the Delaware Supreme Court to review the case. Unless the decision is reversed on appeal, the 2018 pay package will not be recognized under Delaware law.
That’s where Tesla’s move to Texas comes in. If shareholders approve the reincorporation in Texas, legal challenges will be filed in that state and not Delaware.
However, Tesla shareholders could challenge the EV giant’s move to Texas. If that happens that legal challenge would go through Delaware courts, according to Bloomberg.
On May 28, the Delaware judge said she did not believe Tesla would circumvent her ruling on the case, according to media reports.
Tesla wrote in court documents that it was “rank speculation” that it would attempt to bring the case back up in Texas.
Tesla Stock Performance
TSLA shares fell 2% to 173.79 during market action on Monday. Last week, Tesla stock fell 0.3% to 177.48.
TSLA dropped 2.8% in May and have sunk around 30% so far this year.
However, Tesla has rallied since reporting first-quarter earnings and revenue on April 23, finding support just above its 50-day moving average, according to MarketSurge analysis. On April 22, Tesla stock hit a 52-week low of 138.80.
The EV giant will report second-quarter earnings in mid-July.
Tesla stock ranks seventh in the 35-member IBD Auto Manufacturers industry group. The stock has a weak 42 Composite Rating out of a best-possible 99. Shares have a 17 Relative Strength Rating and a 62 EPS Rating.
Please follow Kit Norton on X @KitNorton for more coverage.
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