Tesla Shareholders Reinstates Musk’s $56 Billion Pay Package

Tesla’s shareholders accept Musk’s $56 billion compensation deal and Texas move, which reportedly increased the company’s stock by 3% despite a 27% year-to-date fall.

TakeAway Points:

  • Tesla’s stock increased by 3% after shareholders approved Elon Musk’s $56 billion compensation plan and relocation to Texas.
  • Norges Bank voted against the motion, but institutional investors like Baillie Gifford & Co. and Ark Investment backed it.
  • Even after approval, there are still legal questions surrounding Musk’s remuneration deal, which is bad news for Tesla’s stock price.

Tesla’s Shareholder Vote reapproves Musks Pay Package

Tesla shareholders have voted to reapprove CEO Elon Musk’s $56 billion pay package and to reincorporate the electric vehicle maker in Texas. These preliminary results were announced at Tesla’s annual meeting in Austin on Thursday. 

The vote is seen as a significant victory for Musk, who has been working to reassert control over the company. The approval could play a crucial role in persuading a Delaware judge to reverse or amend a January decision that voided the 2018 stock options package due to concerns about its size and the independence of the board.

Musk and the board have been actively rallying Tesla’s retail shareholders, who own about 30% of the company, to support the resolutions. They also lobbied institutional investors to go against the guidance of proxy advisers ISS and Glass Lewis, who opposed the pay package. Two of Musk’s key allies on the board, James Murdoch and Musk’s brother Kimbal, were also re-elected despite opposition from proxy advisers.

Reaction from the Market

Following Musk’s announcement on X, the social media platform he owns, that the resolutions were “currently passing by wide margins,” Tesla shares rose 3% on Thursday. 

The stock gained as much as 6.4% in early trading in New York. However, Tesla shares have fallen 27% so far this year. Analysts like Piper Sandler’s Alexander Potter noted that while the vote carries symbolic weight, it does not fully settle the matter as the compensation package can still be deemed illegal.

Wedbush analyst Daniel Ives commented, “This removes a $20-$25 overhang on the stock,” but also noted that Tesla still faces challenges such as choppy demand for electric cars and the task of building a truly self-driving vehicle. 

The debate on whether Tesla is a car company or a technology firm continues, especially as the company aims to transform into an AI company with a focus on developing self-driving cars.

Support and Opposition

The vote saw support from several institutional investors, including Scottish asset manager Baillie Gifford & Co., Cathie Wood’s Ark Investment Management LLC, and Ron Baron of Baron Funds. Baron, a longtime Tesla investor, emphasized in an open letter that the will of the shareholders who voted in 2018 should be respected. He stated that without Musk, there would “be no Tesla,” and this vote might determine whether he stays at the company.

On the other hand, opposition came from Norway’s sovereign wealth fund, Norges Bank, and the California Public Employees’ Retirement System. The company acknowledged in its proxy filing that it “cannot predict with certainty how a vote to ratify Musk’s compensation would be treated under Delaware law.”

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