Tesla (TSLA) stock is up nearly 5% in intraday trading Wednesday ahead of a shareholder vote that will determine whether or not CEO Elon Musk’s estimated $56 billion pay package should be reinstated. The Thursday vote will also include shareholders’ say in whether the electric vehicle maker will move its state of incorporation to Texas from Delaware.
Musk’s compensation package was approved in 2018 and was tied to specific performance milestones, including a significant increase in Tesla’s market cap.
“In order to receive any compensation whatsoever for his work as CEO, Elon needed to meet ultra-ambitious financial and operational targets over a 10-year period,” Tesla said. “Elon met these targets, which created tremendous value for stockholders.”
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However, the compensation package was challenged in Delaware’s Court of Chancery because some shareholders believed the package was excessive and that Tesla’s board of directors were too close to Elon Musk to protect shareholders’ interests, according to CNN.
To try and reinstate the pay package, Tesla is holding a shareholder vote to once again approve the package. In addition, Tesla is asking shareholders to vote on moving its state of incorporation to Texas from Delaware.
“We believe in stockholder rights,” Tesla said. “In Delaware, your vote was not respected.”
However, the results of the vote will not immediately reinstate the pay package. According to Reuters, a ‘yes’ vote will be used as support in Tesla’s case to reverse the Delaware judge’s ruling against the package. If shareholders vote ‘no,’ a new package will need to be introduced, it added.
If shareholders approve the measure to move the state of incorporation to Texas from Delaware, Tesla has said it will not use that move to ignore the judge’s ruling, Reuters said.
How to vote your Tesla shares
To vote, Tesla shareholders can visit VoteTesla.com. From there, you can choose to vote online, vote by QR code or vote by phone.
Is Tesla stock a buy, sell or hold?
Most analysts are on the sidelines when it comes to the Magnificent 7 stock. According to S&P Global Market Intelligence, the consensus analyst target price for Tesla stock is $182.88, representing implied upside of just over 2% to current levels. Meanwhile, the consensus recommendation is a Hold.
However, CFRA Research analyst Garrett Nelson is bullish on TSLA stock with a Buy rating and $210 price target. However, the analyst recognizes the risks within the upcoming vote.
“We think investors should buckle up for what could be a volatile week for shares ahead of TSLA’s annual meeting on Thursday,” Nelson wrote in a June 10 note. The analyst says he’s reluctant to make a prediction on whether the pay package will be approved, but believes the implications of the vote are significant.
“We have long argued that one of the primary reasons the stock trades at such lofty multiples is the innovation of Musk,” Nelson says. “If the pay package were to be voted down, we believe it could increase uncertainty regarding the future leadership of the company and jeopardize the ‘Musk premium.'”
Nelson’s above-average $210 price target represents implied upside of more than 17% to current levels.
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