Tesla nearing shareholder vote to grant Musk $46B

Fundamentals are for losers: It's a good time to head the worst performing stock in the S&P

Owners of Tesla stock will vote on June 13 to determine whether the company's CEO Elon Musk deserves a $46 billion payday.

The date of the vote was confirmed by the Wall Street Journal, which says company executives like Tesla board chair Robyn Denholm will campaign to convince shareholders to approve the measure. If the vote passes, Musk would get millions of shares worth about $46 billion according to current share valuations.

The vote is an attempt to reinstate a pay package shareholders agreed to in 2018 if Musk hit certain financial and stock price targets, which he did within just five years. The tycoon would have gotten his awarded shares earlier this year, when they were worth around $56 billion, if it weren't for a Delaware judge striking down the 2018 deal on grounds that the negotiation process was compromised the board's chummy relationship with Musk.

As for why Musk needs tens of billions of dollars, the reasoning is that Musk, the second richest man in the world, may consider leaving Tesla should he not be compensated for his work during his time as CEO. There is also an argument that the original vote should simply be honored since its overturning represents an infringement on the rights of owners of Tesla stock.

Tesla announced its intentions to hold a new shareholder vote in its proxy statement to the Securities and Exchange Commission last month. The proxy statement also asks shareholders to approve the company's move to Texas, which is probably related to Musk saying "never incorporate your company in the state of Delaware" after the original pay package was scrapped.

There's apparently even a campaign to convince shareholders to say yes to the award package, headed by Tesla chair Denholm, who met with investors in New York earlier this week and will do so again in June. Tesla has gone as far as running ads to get shareholders to vote yes.

Such a campaign might be needed in order for the vote to pass, which can only happen if a majority of voting shareholders agree. However, Musk, who owns 13 percent of Tesla stock won't be able to vote on the proposal, which means it comes down to the other 87 percent of shares. Of particular note is the fact that around 30 percent of all Tesla shares are owned by individual investors, which makes their vote count even more since Musk's shares are excluded.

Big institutional shareholders were not completely convinced back in 2018, such as investment management group Vanguard, and their support isn't guaranteed this time around either. The approval of individual investors, who tend to skip votes, could potentially shift the balance in Musk's favor. 

Convincing Tesla shareholders to give Musk billions of dollars will be challenging, as the stock is well down from its 2021 peak and has been the worst performing stock in the S&P500 this year, just slightly worse than Boeing.

That's a reflection of the company's dismal financials, as the company's results for the first three months of the year saw misses on pretty much every metric. Tesla is also going through chaotic back-to-back rounds of layoffs, which saw the near dissolution of its Supercharger division and then a sudden u-turn that brought some fired employees back. ®

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