The analyst warned on the pay package vote

New York Post

Elon Musk was none too pleased.
Shareholders are set to vote on the package for a second time on Thursday, June 13.
More Tesla: Tesla rival misses payment, Chapter 11 bankruptcy possible Hertz sells off Tesla fleet at discount as EV sales slump Analyst unveils Tesla stock price target before Q2 deliveries “I should note that Tesla continuously improves its cars, so even a car that is six months newer will be a little better,” he wrote on June 8.
Bernstein analysts on Monday said Musk’s pay package was unlikely to pass the shareholder vote.
Bernstein pointed out that Tesla has never seen more than a 63% voter turnout in any shareholder vote.
Bernstein said that if Musk’s pay package is blocked, Tesla’s diluted-share count would decrease by 9% going forward, increasing earnings per share by 10%.
If the pay package is rejected, however, the stock also would likely be down 5% or more amid concern that Musk might leave Tesla.
The firm said that investors may be underestimating the risk that Musk’s pay package will be rejected, making the risk/reward balance into the shareholder vote currently skewed to the downside.

NEGATIVE

Not too thrilled was Elon Musk.

The CEO of Tesla (TSLA) commented, “Yeah, this is not cool,” on his social media platform X.

Musk was responding to the news on Saturday that Norway’s $17 trillion sovereign wealth fund would abstain from voting to ratify Musk’s proposed $56 billion pay package.

The fund expressed its gratitude for “the significant value generated under Mr. Musk’s leadership since the grant date in 2018,” Reuters reported. The fund is, based on LSEG data, Tesla’s eighth-biggest shareholder.

But, the fund’s operator, Norges Bank Investment Management, stated that “we remain concerned about the total size of the award, the structure given performance triggers, dilution, and lack of mitigation of key-person risk.”.

The fund had cast a vote against the package in 2018. On Thursday, June 13, shareholders are scheduled to vote on the package a second time.

The fund stated, “On this and other topics, we will continue to seek constructive dialogue with Tesla.”.

The general public is overwhelmingly in favor, according to Musk.

Musk wrote in his post, “They would find overwhelming support in favor if they actually surveyed their constituents.”. About 90% of retail shareholders who have cast ballots thus far have supported both resolutions. The general consensus is categorically in favor. “.

A shareholder proposal urging Tesla to implement a freedom of association and collective bargaining policy was also supported by the fund. This would be a victory for labor unions trying to make a name for themselves at the Austin automaker.

The fund invests the nation’s oil and gas industry’s earnings to guarantee pensions for Norway’s future generations.

Judge Kathaleen McCormick of Delaware Chancery Court dismissed the package in January, describing the amount as “unfathomable.”. “.

In his decision, McCormick stated that Musk and the Tesla board “were responsible for demonstrating that the pay plan was equitable, and they did not fulfill this obligation.”. “.

In response, Musk wrote in a post: “Never incorporate your business in Delaware. “.”.

Two shareholder advisory firms, ISS and Glass Lewis, recommended voting against the package in May.

In its suggestions regarding Tesla’s proxy voting items, ISS stated that Musk’s stock-based package was excessive when it was approved by shareholders in 2018 and that it did not meet the board’s goals at the time.

Musk has taken steps to re-incorporate Tesla under the more benevolent regulatory framework of Texas, even as Tesla presses the courts to grant approval.

The contributions of Musk, according to Tesla Chairwoman Robyn Denholm, “have built Tesla from a company that was, in 2018, a loss-making, ambitious company with significant hurdles and challenges to overcome into what it is today — a company that is literally changing the world by driving so many critical initiatives that are making our planet more sustainable while at the same time delivering hundreds of billions of dollars of value to all of you who invested in Tesla’s dream.”. “.

“Our commitment to Elon in 2018 had one simple goal: to keep Elon focused on Tesla and motivated to achieve the company’s incomparable ambitions,” the statement reads. It was overwhelmingly approved by roughly 73% of disinterested stockholders.

“We must stick by our deal if Tesla is to keep Elon’s attention and inspire him to continue dedicating his time, energy, ambition, and vision to deliver comparable results in the future,” Denholm continued. “.

“Clearly, this has nothing to do with money,” she remarked. “Elon is among the richest persons on the planet, as we all know, and he would continue to be so even if Tesla were to back out of the agreement we made in 2018.”. Both Tesla and Elon Musk are not your average CEO or business.

“Hence, for Tesla, the usual method that businesses pay their top executives is not going to produce results,” stated Denholm.

After falling from $249 in January, Tesla’s stock has been trending lower recently. At the last check, 2 to $176.34.

Analysts observe the effect on stocks.

For the first time in almost four years, Tesla reported a drop in quarterly deliveries in April, missing Wall Street forecasts.

Musk declared on X that “no Model Y’refresh’ is coming out this year.” in the meantime. Its midsize SUV is called Model Y.

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On June 8, he wrote, “I should note that Tesla continuously improves its cars, so even a car that is six months newer will be a little better.”.

Musk’s compensation package is unlikely to pass the shareholder vote, according to Bernstein analysts on Monday.

The investment firm stated in a research note that about 25% of eligible voting shares are held by institutional investors who have made their intention to vote no known in the open market, or by passive investors who are likely to heed ISS and Glass Lewis’ “no” recommendation.

Bernstein brought up the fact that Tesla has never had a shareholder vote with a turnout of more than 63 percent.

According to the company, Tesla would need more than 73% of the voters who are still unaccounted for to vote in favor of the pay package, even if turnout is significantly higher at 75%.

It also stated that there is a greater but still unknown chance that Tesla’s proposed redomestication to Texas will be approved.

Tesla’s diluted share count would drop by 9% going forward, boosting earnings per share by 10%, according to Bernstein, if Musk’s compensation package is blocked.

But, in the event that the compensation package is turned down, the stock would also probably fall by five percent or more due to worries that Musk might quit Tesla.

Bernstein maintained a $120 price target and an underperform rating for Tesla.

The company stated that the risk/reward balance in the shareholder vote is currently skewed to the downside, suggesting that investors may be underestimating the likelihood that Musk’s compensation package will be rejected.

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