This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
With the fate of Elon Musk's commitment to Tesla hanging in the balance, the upcoming shareholder vote on reauthorizing Musk's voided compensation package is being billed as a "make or break event" for the world's premier manufacturer of electric vehicles. Yet, despite the hype, the shareholders' vote on this issue possesses only symbolic value for now.
For the benefit of those who might not be aware, the Delaware Court of Chancery voided Elon Musk's 2018 pay package a few weeks back for being a product of sham negotiations between a beholden board and an increasingly powerful and assertive CEO.
Tesla is slated to hold its annual general meeting (AGM) of the shareholders on the 13th of June, where the company's investors are expected to vote on two primary proposals: to reauthorize Elon Musk's $56 billion remuneration package and to approve Texas as Tesla's state of incorporation.
Musk has staked his commitment to Tesla as a bargaining chip to convince shareholders to approve his desired pay package. Even so, the measure is receiving a sizable pushback from not only the proxy firms advising the shareholders on this issue but also from a number of institutional investors.
BERNSTEIN: “.. Elon Musk’s $56B pay package is unlikely to pass the shareholder vote. .. if the pay package is rejected, the stock would likely be down (potentially 5%+) amid fears that Musk might leave ..”
Reiterate $TSLA Underperform, $120 price target. pic.twitter.com/a02xXIptdZ
— Carl Quintanilla (@carlquintanilla) June 10, 2024
It is hardly surprising, therefore, that Bernstein has made a rejection of Elon Musk's compensation package proposal its base case, predicting a 5 percent-plus correction in the stock in the immediate aftermath. Bernstein analysts think that the math against the proposal is "pretty straightforward."
"I think it's gonna be tough to pass. The math is pretty straightforward. .. Very quickly, you see a very big 'no' cohort."
Yet, even if this proposal wins approval from a majority of Tesla's shareholders, Elon Musk likely won't be able to get his hands on his previously vested stock options anytime soon.
hmmm...
Just as a reminder, far more consequential than the pay package vote (which will be legally ineffective anyway) is the reincorporation vote.
Elon wants bought & paid for judges in Texas. Period. https://t.co/kgFrqpBxNQ
— Montana Skeptic @[email protected] (@montana_skeptic) June 10, 2024
Elon Musk's legal team has already assured the Delaware Court of Chancery that the CEO of Tesla will not use a change in the company's state of incorporation to try to undo the court's ruling, terming this possibility a "rank speculation" on the part of the plaintiff. Musk's legal team has also conceded that the Delaware Chancery Court will retain jurisdiction over his ongoing pay dispute.
Therefore, the only way forward is for Elon Musk and Tesla to appeal the court's ruling. However, this can't be done until the court settles a $6 billion claim filed by the plaintiff's lawyers as remuneration for their services. The first hearing on this legal fee dispute is currently slated for the 08th of July.
The issue is not yet before the Court. If the "ratification" occurs, it will immediately be challenged by Tornetta Plaintiff.
There are purely legal challenges that could result in a quick summary judgment type ruling. And there are fact-based challenges that take longer.
— Montana Skeptic @[email protected] (@montana_skeptic) June 10, 2024
What's more, the plaintiff shareholder, Richard Tornetta, can choose to challenge Elon Musk's newly ratified compensation package as well, adding to the legal complications on this issue.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
Follow Wccftech on Google to get more of our news coverage in your feeds.
