Tesla shareholders approve Elon Musk’s record pay deal and move to Texas

Tesla shareholders have voted to both re-approve a pay package for Chief Executive Elon Musk that was once valued at $56 billion and to reincorporate the Texas-based electric vehicle maker, giving him important victories as he seeks to regain control. on the company.

The preliminary results, announced at Tesla’s annual meeting in Austin on Thursday, will strengthen the company’s hand as it tries to overturn a January ruling by a Delaware court to void its 2018 stock option package — the largest in US history – because of concerns about its value and board independence.

While the vote does not replace the court’s decision, ratification can be helpful in persuading the judge to change or reverse her position. Musk’s control of the company would be strengthened, increasing the CEO’s stake to more than 20 percent from his current 13 percent.

After the polls closed shortly after 4pm in Austin, Musk took the stage to address a rapturous crowd chanting his name, jumping up and down in celebration in front of a blue and pink neon sign in the shape of Texas.

“I love the hell out of you guys,” he told the audience of carefully selected retail investors. “We have the most amazing shareholder base of any public company. . . we are not starting a new chapter, we are opening a new book.”

The excited CEO joked, noting during his speech “what do you know, it’s 4:20 p.m.,” referring back to a 2018 tweet about taking Tesla private for $420 a share. Many interpreted the award as a reference to 4/20, with April 20 being a day celebrated by marijuana smokers.

The “cyber briefing” event was the culmination of a months-long campaign by Musk and the board to rally shareholders to support the two resolutions, in what amounted to a referendum on how best to lead one of the world’s richest men.

The votes were also validation of Tesla’s repositioning as an artificial intelligence and robotics company. Musk explored plans to develop a connected fleet of millions of fully autonomous cars and described a future with tens of billions of humanoid robots, which together could drive Tesla’s revenue to a trillion dollars or more, he claimed. .

Mobilizing Tesla’s retail investors was particularly important because they own about 30 percent of the stock, an abnormally high percentage for a public company. Musk also successfully lobbied institutional investors to go against the guidance of proxy advisers ISS and Glass Lewis, who criticized his salary as “huge” and “excessive”.

In another victory, two of Musk’s key allies on the board were re-elected despite opposition from proxy advisers: former 21st Century Fox chief executive James Murdoch and Musk’s brother Kimbal.

The wins weren’t unexpected as Musk tweeted on X Wednesday night that both resolutions were “currently passing by wide margins!”

Tesla shares rose 3 percent Thursday after his post, but the stock’s recent performance has been disappointing. It’s down 29 percent in the past year, leaving it valued at $571 billion, closer now to JPMorgan and Walmart than other “Magnificent Seven” tech giants like Microsoft and Nvidia, which are worth more than 3 trillion dollars.

The drop also means Musk’s stock options in 2018 are worth $48 billion, down from $56 billion previously.

Still, the results are a vindication for Tesla’s previously silent chief executive, Robyn Denholm, who emerged as the voice of the shareholder campaign on social media in recent months. It lent heavily to the slogan “a deal is a deal,” arguing that Musk hit stock price and financial targets in the original 2018 package that were considered “too ambitious.”

Its reputation was at stake after it was criticized by a Delaware judge for “an improper approach to its oversight obligations” and for running a board that acted as “loose servants of an extraordinary master.”

Behind the scenes, Denholm warned asset managers that Tesla risked losing Musk if he didn’t get his shares. The former Australian accountant said options were essential to keep him motivated because “his passion and hobby is interplanetary space travel,” one of the people said.

Musk runs SpaceX, the world’s most valuable private company that has a near-monopoly on reusable rockets. Other ventures include social media platform X, brain implant startup Neuralink and AI group xAI. He has publicly threatened to develop future AI products outside of Tesla if his stock doesn’t rise, saying he needs at least 25 percent to protect the company from activists or a hostile takeover.

“Autonomy is critical to Tesla’s future. . .[and]to cross that finish line it’s essential that Elon be on top,” said Tasha Keeney, director of investment analysis and institutional strategies at Cathie Wood’s Ark Investment Management.

“We invest in disruptive innovation, achieving something that seems impossible to achieve means you have to have compensation to meet that difficult goal,” she added.

While final voting data will probably be released on Friday, there has already been a major coup. Vanguard, Tesla’s largest shareholder with a 7.3 percent stake, changed its stance on the pay after opposing it in 2018, according to a person familiar with the results. BlackRock, the second largest, also supported both resolutions. BlackRock declined to comment and Vanguard did not respond to requests for comment.

Other prominent shareholders, including Nordea Asset Management and the California Public Employees’ Retirement System, publicly opposed the reauthorization.

The next phase of the pay saga is a hearing in Delaware early next month, when the judge, Kathaleen McCormick, will consider a $5.2 billion fee request made by the winning attorneys. After its decision, Tesla can appeal the payment decision to the Delaware Supreme Court.

While Tesla may quickly file paperwork to reincorporate in Texas, it is not expected to have an impact on the payment decision as local courts will still have to abide by the Delaware ruling.

The remaining obstacles did little to dampen the festive mood in Austin, where attendees lined up to sign a “Don’t mess with Tesla retail shareholders” banner.

Musk answered questions for more than an hour on a variety of topics, from his shoes to whether six-year-olds should be allowed to tour Tesla’s gigafactory. One shareholder was visibly shaking as he asked his “idol” a question.

Musk also claimed to have had two “homicidal maniacs” threaten his life in the past 12 months and spoke of calls “out of the blue” from Donald Trump, who he said was a Cybertruck fan and with whom he has been linked to an advisory role if the former US president is re-elected in November.

Praise also poured in online.

“Congrats Elon on getting your promised paycheck and your new Texas incorporation,” the state’s Republican governor, Greg Abbott, posted on X. “Welcome to a state that doesn’t even have a personal income tax and nor corporate.”

Additional reporting by Patrick Temple-West and Sujeet Indap

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