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Tesla Shares Surge as Musk Claims Shareholder Support for Compensation Package and Texas Move
Tesla Inc.'s shares witnessed a substantial jump following CEO Elon Musk's announcement that shareholders had voted convincingly in favor of re-approving his compensation package and relocating the company’s state of incorporation to Texas.
Prior to the conclusion of the shareholder voting and Tesla’s annual meeting in Austin, Musk shared the voting results on X, the social media platform he owns. He presented two charts that indicated the approval of these proposals. Following this announcement, Tesla’s stock surged up to 6.4% in the early morning trading session in New York.
Pay Package Under Scrutiny
Over the past two months, Musk and Tesla’s board have actively sought support for the measures, particularly focusing on the CEO’s compensation deal. This package could potentially grant Musk up to $55.8 billion in stock options, contingent on the company achieving specified milestones. However, this compensation agreement faced turbulence earlier this year when a Delaware judge invalidated it due to conflicts of interest among Tesla’s directors and lack of proper disclosure.
Though shareholders’ approval of Musk’s pay package carries more symbolic value than legal authority, it may bolster Tesla’s position in any upcoming legal appeals or rehearings. Nevertheless, Tesla’s proxy filing warned that the exact legal weight of this vote under Delaware law remains uncertain. Piper Sandler analyst Alexander Potter remarked that while the stock might react positively to the news, the upside is expected to be more modest compared to the potential downside had shareholders rejected the compensation deal.
Strategies for Securing Support
In the lead-up to the vote, Tesla’s Chair Robyn Denholm engaged with significant institutional investors, while the company also ran multiple advertisements on X to promote the proposals. Prominent Tesla supporters, including current and former executives and engineers, voiced their backing for Musk on the social media platform.
Investment firms such as Baillie Gifford & Co., Cathie Wood’s Ark Investment Management LLC, and Ron Baron’s Baron Funds were among those in favor of the re-approval. Baron, a longtime Tesla investor, emphasized in an open letter that the shareholders' will from the 2018 vote should hold. He further suggested that Musk’s presence is crucial for Tesla’s future.
Opponents of the compensation package included Norges Bank, which manages Norway’s sovereign wealth fund, and the California Public Employees’ Retirement System.
Relocation to Texas
Besides the compensation package, shareholders also voted on Tesla’s proposal to reincorporate in Texas. Despite potential legal challenges under Delaware law, the company proceeded with the proposal, acknowledging possible objections from shareholders.
The investor meeting will be available via livestream, scheduled to start at 4:30 p.m. New York time on Thursday.
