You’re here (TSLA) shareholders will vote in the run-up to the June 13 annual meeting as everyone waits for the outcome to see whether or not Chief Executive Elon Musk’s $56 billion compensation package for 2018 will be re-approved.
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Since Tesla asked shareholders on April 17 to ratify Musk’s 2018 pay plan, despite the plan being overturned by a Delaware court earlier this year, the electric vehicle giant has tried to mobilize votes from its base of individual investors. Musk’s compensation deal is currently valued at around $46 billion.
The vote comes after a Delaware judge ruled against the 2018 package, saying it was excessive and unfair to Tesla investors. The judge criticized the âextensive tiesâ between Musk and Tesla board members.
Tesla Chairman Robyn Denholm and other Tesla executives plan to spend the next few weeks traveling around the world to build shareholder support, according to the Wall Street Journal. In 2018, Tesla’s board won approval of Musk’s 2018 salary package with 73% of the vote.
Tesla shareholders are also currently voting on whether to move Tesla from Delaware to Texas. The electric vehicle giant has been incorporated in Delaware since 2003.
The necessary votes
Voting has been open for a few weeks. Tesla’s board of directors recommended voting “yes” on both Texas reinstatement and Musk’s compensation.
Voting on Musk’s compensation requires a simple majority of votes, excluding those held by Musk and his brother, Kimbal Musk. Meanwhile, voting to re-incorporate Tesla in Texas requires a majority of all outstanding shares, with any votes not cast counted as “no.”
All Tesla shareholders can vote at Tesla’s annual meeting until June 12 at 11:59 p.m. Eastern Standard Time. Registered shareholders can also vote at the virtual annual meeting.
Retail or individual investors currently own about 30% of Tesla shares. Last week, billionaire Leo Koguan, who owned more than 27 million shares of TSLA stock, posted on X that he had voted against Elon Musk’s compensation plan. Koguan also voted against the incorporation of Tesla in Texas and against the new mandates of Elon Musk, Kimbal Musk and James Murdoch.
Koguan has a net worth of $5.9 billion, Forbes estimates. He is one of Tesla’s largest retail investors.
Institutional investors own a much larger share of Tesla stock than in 2018. Vanguard voted against Musk’s pay package in 2018, while BlackRock and many others supported it.
In 2018, proxy advisory firm Institutional Shareholder Services recommended voting no on the Tesla package, saying the compensation was excessive. The ISS did not influence the current votes.
“It’s like Mount Everest. It’s a huge hill to climb because it’s quite difficult to get 50% of shareholders to vote, let alone what they’re voting for,” Denholm, Tesla’s chairman, said. to the Financial Times late last week.
The legal situation
Meanwhile, it remains unclear how the Delaware court might respond. The judge has scheduled a hearing for July 8 to decide whether lawyers for the Tesla shareholder who filed the lawsuit against Tesla will receive $6 billion in TSLA stock as legal fees.
After this hearing, Musk may ask the Delaware Supreme Court to review the case. Unless the decision is overturned on appeal, the 2018 salary package will not be recognized under Delaware law.
This is where Tesla’s move to Texas comes into play. If shareholders approve reincorporation in Texas, legal challenges will be filed in that state and not Delaware.
However, Tesla shareholders could take issue with the electric vehicle giant’s move to Texas. If that happens, that legal challenge would be brought before the Delaware courts, according to Bloomberg.
Tesla Vote: Musk’s Control Warning
Meanwhile, Musk has hinted throughout the year that he believes he needs more TSLA stock and voting power.
In January, Musk posted on X that he was “Tesla growing uncomfortably being a leader in AI and robotics without having ~25% voting control. The CEO added that he wanted enough actions to be “influential, but not so influential that you can’t be overthrown.”
âItâs all about securing enough electoral influence at Tesla,â Musk said. âAt 15% or less, the ratio for/against me to circumvent makes it too easy for dubious interest takers.â
Musk currently owns a nearly 13% stake in Tesla. Before selling TSLA stock to buy Twitter, now X, for $44 billion in late 2022, Musk owned about 22% of Tesla.
Since issuing this warning, Tesla and Musk appear to be focusing more on autonomy, its Full Self-Driving (FSD) technology and its robotaxi program, as demand for electric vehicles has slowed.
Tesla Stock Performance and Tesla Voting
TSLA shares fell 1.9% to 174.10 on Monday market trade. The stock is down 4.6% in May and has fallen about 30% for the year.
You’re here results and revenues reported for the first quarter on April 23, and has rallied since then, finding support at its 50-day moving average, according to MarketSurge Analysis. Tesla stock hit a 52-week low of 138.80 on April 22.
Adam Jonas, a leading auto analyst at Morgan Stanley and a Tesla buyer, wrote on May 10 that Tesla’s shareholder vote is important to the company’s “long-term strategic direction.”
âWhile it is impossible to predict the outcome, we expect that the event may result in significant volatility in the stock,â Jonas wrote.
âWhile the blocking minority issue remains in limbo, we expect Tesla’s stock price to be dominated by the most concerning developments within the global electric vehicle industry,â a- he added.
Tesla stock ranks eighth in the 35-member IBD Automotive Manufacturers Industry Group. The title has a low 37 Composite score on a best possible 99. Tesla stock also has a 17 Relative Strength Rating and a 62 EPS rating.
Please follow Kit Norton on @KitNorton for more coverage.
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