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Tesla shares up after shareholders approve CEO Elon Musk's massive pay package

Tesla shareholders greenlight Elon Musk’s $56 billion pay deal

Tesla shareholders approved CEO Elon Musk's massive pay package late Thursday, marking an important symbolic victory for the EV maker. They also greenlit the company's move to reincorporate in Texas from Delaware.

The advisory vote on the pay package, while not legally binding, saw Tesla shares rise on the day, closing up 3% at the end of trading on Thursday. Tesla shares have had a rough ride so far in 2024 — they are down over 26% year-to-date as of June 14.

Musk, receiving cheers and chants of “Elon, Elon!” from the shareholders, expressed his gratitude, saying, “I just want to start off by saying, hot damn, I love you guys. We are not just opening a new chapter for Tesla, we are starting a new book.”

Musk then proceeded to double down on the company’s ambitious autonomous-vehicle goals, calling them “mind blowing”, and noted that large shareholders may not fully grasp their potential.

He also highlighted Tesla’s advanced capabilities in humanoid robots, AI, and chip-making, asserting that Tesla’s know-how “far” exceeds that of companies like Apple, Meta Platforms, and Nvidia. The latter recently became the third three-trillion-dollar company in the U.S., behind Apple and Microsoft.

The last two Tesla earnings reports have left some investors skeptical of the stock, with the January report even being described as a “train wreck”. The company also disclosed a 48% drop in Q1 profits at its last earnings call in April. Musk has made efforts to reassure investors that the EV maker is in between “two major growth waves”.

Musk's tweets alone have also given TSLA shares a fair bit of momentum this year.

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Legal battle over Musk pay “far from over”

Before the meeting, a “no” vote on the pay package was seen as a potential setback for Tesla, while a “yes” vote raised hopes for success in any legal challenge to the Delaware court's January decision that rescinded the package.

Thursday’s approval removes a major concern, potentially averting a scenario where Musk might leave Tesla to focus more on his other ventures, according to comments from CFRA analyst Garrett Nelson shared with MarketWatch:

“The news lifts a major overhang on the shares, although we wouldn’t be surprised by a ‘sell the news’ reaction on Friday following big gains over the past two trading sessions”.

By supporting the pay package, shareholders sent a clear message that “a deal is a deal” and that Musk deserved to be rewarded for meeting the contract's challenging targets. Nelson added:

“The legal battle over the compensation plan is far from over, but we think the vote greatly strengthens Tesla’s case”.

Tesla shareholder approval of Musk pay “may not fully resolve the matter”

Tesla acknowledged that the vote's outcome would still leave legal uncertainties. The company said in proxy documents that “even a favorable vote by our stockholders to ratify the 2018 CEO performance award may not fully resolve the matter”, and that it could not “predict with certainty how a stockholder vote to ratify the 2018 CEO performance award would be treated under Delaware law in these novel circumstances”.

Musk and other top Tesla executives had sought retail investor support for the CEO pay package, despite opposition from some large institutional investors and proxy advisers.

Tesla board Chair Robyn Denholm defended the pay package as “a matter of fundamental fairness and respect to our CEO” and praised Tesla’s investors, stating, “no other shareholder base understands the company as you do. You are the owners of the company.”

Tesla shares gain after Musk's pay package approved by shareholders

Citi “stays neutral” on Tesla shares, sentiment could improve on “pivot to new products”

Musk also noted on X late Wednesday that both his compensation package and the reincorporation in Texas were passing by “a wide margin.” Shareholders re-elected James Murdoch and Kimbal Musk, Elon Musk’s brother, to the board.

Citi analyst Itay Michaeli, in a note cited by MarketWatch earlier on Thursday, said he was “staying neutral” on the shareholder vote but suggested that sentiment on Tesla shares could improve “if the story can pivot toward new products” and provides a credible autonomous vehicle deployment plan at its upcoming “robotaxi” event.

Tesla shares have declined by about a quarter this year, contrasting with a 14% gain for the S&P 500 index.


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