If Tesla shareholders vote against restoring Elon Musk’s $44.9 billion pay package Thursday, the CEO could deliver on threats to take artificial intelligence research to one of his other companies. Or he could even could walk away. If they approve the all-stock compensation package that was thrown out by a Delaware judge in January, it would almost guarantee he would remain at the company he grew to be the world leader in electric vehicles, shifting to AI and robotics including autonomous vehicles, which Musk says is Tesla’s future.
Quick Read
- Shareholder Vote: Tesla shareholders will vote on Thursday regarding Elon Musk’s $44.9 billion pay package.
- Potential Outcomes: If shareholders vote against the pay package, Musk could move AI research to another company or leave Tesla.
- Approval Consequences: Approval of the all-stock compensation package would likely ensure Musk remains at Tesla, focusing on AI, robotics, and autonomous vehicles.
- Uncertainty Remains: Despite likely reapproval, Musk has threatened to develop AI elsewhere if not granted a 25% stake in Tesla (currently holds 13%).
- Analyst Expectations: Analysts, including Dan Ives from Wedbush, predict the package will be overwhelmingly reapproved, easing Tesla’s stock uncertainty.
- Stock Performance: Tesla shares have declined more than 30% this year, with warnings of lower sales growth in 2024.
- Related Issues: Shareholders will also vote on moving Tesla’s legal home from Delaware to Texas to avoid Delaware court oversight.
- Court Ruling: Delaware judge invalidated Musk’s pay package, citing Musk’s control over Tesla’s board. Multiple institutional investors oppose the package.
- Institutional Votes: Major shareholders like Vanguard and BlackRock control about 17% of votes and have not disclosed their voting intentions.
- California’s Opposition: The California State Teachers Retirement System opposes Musk’s pay package due to its magnitude and potential shareholder dilution.
- Advisory Firm Recommendations: ISS and Glass Lewis advised voting against the pay package.
- Tesla’s Campaign: Tesla has been actively lobbying for the pay package approval through social media and SEC filings.
- Chairwoman’s Letter: Tesla Chairwoman Robyn Denholm argues that Musk’s efforts have generated significant shareholder value, making the pay package justified.
- Legal Strategy: If Tesla moves its legal home to Texas before the vote, the Delaware court ruling’s effect could be in doubt, potentially falling under Texas court jurisdiction.
- Legal Assurance: Tesla’s lawyers assured the Delaware court they won’t seek to move the case, giving comfort to Chancellor McCormick.
- Legal Appeal: Tesla is expected to appeal the Delaware court ruling to the Delaware Supreme Court if the pay package is reapproved.
The Associated Press has the story:
Future of Elon Musk & Tesla are on the line this week as shareholders vote on massive pay PKG
Newslooks- DETROIT (AP) —
If Tesla shareholders vote against restoring Elon Musk’s $44.9 billion pay package Thursday, the CEO could deliver on threats to take artificial intelligence research to one of his other companies. Or he could even could walk away.
If they approve the all-stock compensation package that was thrown out by a Delaware judge in January, it would almost guarantee he would remain at the company he grew to be the world leader in electric vehicles, shifting to AI and robotics including autonomous vehicles, which Musk says is Tesla’s future.
But even with reapproval at Thursday’s annual shareholders’ meeting, which many analysts say is likely, there would be uncertainty. Musk has threatened on X, his social media platform, to develop AI elsewhere if he doesn’t get a 25% stake in Tesla (He owns about 13% now). Musk’s xAI recently received $6 billion in funding to develop artificial intelligence.
Wedbush Analyst Dan Ives said he expects the package to be overwhelmingly reapproved, ending a lot of uncertainty with Musk. “This issue has been an overhang on Tesla’s stock, and this will be important to move this distraction in the rearview mirror,” Ives wrote in a note to investors.
Shares of Tesla Inc. have slumped more than 30% this year with the company warning of “notably lower” sales growth in 2024.
Also on the shareholder ballot is the related issue of moving the electric vehicle maker’s legal home out of Delaware to Texas.
The move is designed to escape from the Delaware court’s oversight and possibly a ruling from Chancellor Kathaleen St. Jude McCormick that invalidated Musk’s pay package. In a January opinion on a shareholder lawsuit, the judge determined that Musk controlled the Tesla board and is not entitled to the landmark package once worth nearly $56 billion.
Multiple institutional investors have come out against that sizeable payout, some citing falling vehicle sales, price cuts and the tumbling Tesla stock price. But Tesla’s top five institutional shareholders, Vanguard, BlackRock, State Street, Geode Capital, and Capital Research either said they don’t announce their votes or wouldn’t comment. They control about 17% of the votes.
Erik Gordon, a business and law professor at the University of Michigan, said individual shareholders are likely to vote for the package, and they own more than half of Tesla’s shares.
One institutional investor who came out against the package is California’s State Teachers Retirement System. The large pension fund said Tuesday that it would vote against Musk’s pay “based on its sheer magnitude, and because the award would be extremely dilutive to shareholders. We also have concerns with the lack of focus on profitability for the company.”
In May, two big shareholder advisory firms, ISS and Glass Lewis, recommended voting against the package.
But Tesla and Musk have unleashed a furious lobbying effort to get the package approved, in posts on X, television appearances and in proxy filings with the U.S. Securities and Exchange Commission.
“Only 2 days left to protect & help grow the value of your investment in $TSLA by voting FOR ratification of the 2018 CEO Performance Award,” Tesla posted on X early Tuesday.
Tesla Chairwoman Robyn Denholm, in a letter to shareholders, wrote that the package was approved by 73% of the vote six years ago. “Because the Delaware Court second-guessed your decision, Elon has not been paid for any of his work for Tesla for the past six years that has helped to generate significant growth and stockholder value. That strikes us — and the many stockholders from whom we already have heard — as fundamentally unfair, and inconsistent with the will of the stockholders who voted for it,” she wrote.
Tesla has said the 2018 award incentivized Musk to create over $735 billion in value for shareholders in the six years since it was approved.
If Tesla finalizes the vote on moving the company’s legal home to Texas before the vote on Musk’s pay package, and it manages to file the paperwork in Austin and get approval of the move, then the effect of the Delaware court ruling could be in doubt. Reapproval of the pay package would then be done as a Texas corporation and could fall under the purview of Texas courts.
Anticipating a quick move by Tesla, lawyers for the shareholder who filed the lawsuit seeking to block Musk’s pay deal, Richard Tornetta, filed motions in Delaware last month seeking an order stopping Tesla from trying to move the case. Tesla responded in letters to the judge that there is no cause for such concerns because they won’t seek a move. Besides, Tesla would still be a Delaware corporation at the time of this week’s shareholder vote, they wrote.
In an order denying Tornetta’s motions, Chancellor McCormick wrote that she interprets Tesla’s letters to mean it has no intention of relocating the case to Texas. “The defendants’ statements give me great comfort,” she wrote.
Eric Talley, a Columbia University law professor, said the lawyers are unlikely to try to move the case because their livelihood is handling business cases in Delaware courts.
But it’s also possible that the unpredictable Musk could change lawyers.
McCormick, Talley said, is telling the lawyers “OK, I’m going to believe you, but I’m going to be really irritated if this is a big send up for these things that you said you’re not going to do.”
Talley, who also is a Tesla shareholder and said at present he plans to vote against Musk’s pay, expects Tesla to follow through with appealing McCormick’s ruling to the Delaware Supreme Court.
