Elon Musk got 72% in Tesla shareholder vote on pay

Tesla shareholders strongly supported the proposal to affirm Elon Musk's multibillion-dollar pay package, according to details of the vote published Friday.

The vote of confidence in Musk reduces the risk that he will leave Tesla, but it could also validate behavior that some investors say has hurt the automaker, analysts and investors said.

Approval of the proposal was announced Thursday at Tesla's annual shareholder meeting, without the underlying total. Ultimately, about 72% of voting shares, excluding shares owned by Musk and his brother Kimbal, supported the pay package.

For months, many Tesla investors have worried about how busy Elon Musk would be running the electric car company after a Delaware judge struck down his pay package, originally approved in 2018.

The compensation plan requires Musk to hold the shares for at least five years before selling them, and the value of the package will continue to fluctuate before he can do so. At Thursday's closing price, the shares were worth about $48 billion.

Addressing shareholders after the vote, Musk promised to be committed to Tesla. The pay package, he said, “isn't actually cash, and I can't run away, nor would I want to.”

Tesla shares fell more than 2% on Friday, reversing some of the gains made a day earlier, when Musk said the pay vote would be approved before official results were announced. Its legions of online supporters celebrated the vote and analysts revised their reports on Tesla's prospects.

Vanguard, whose 7% stake in Tesla makes him the company's second-largest shareholder after Musk, voted in favor of the wage premium despite having voted against it in 2018. In a note explaining its reversal, Vanguard said that while it was concerned Regarding the size of the package, “the unique circumstance of evaluating the plan retroactively eliminated our concerns.”

The result served as a “vote of confidence in Elon,” analysts at Bernstein wrote in a note after the result. “While some uncertainty remains about the legal process and next steps, by this standard the vote was a clear step, easing concerns that Elon might leave the company or direct more energy elsewhere.”

The clear mandate was a disappointment to investors who hoped the vote might pressure Musk to address declining car sales or spend less time on X, the social media platform he owns.

“I don't think he's learned any lessons,” said Ross Gerber, chief executive of investment firm Gerber Kawasaki, an early investor in Tesla who has trimmed his holdings lately. “He'll see this as a victory: 'I'll keep doing what I've been doing.'”

Tesla's board of directors hoped that a second confirmation of the wage premium might convince the Delaware court to overturn its ruling. The judge in the case said the award was excessive and had been dictated by Mr Musk to a council with personal ties to him.

“We believe the ratification vote requested and forced by Elon is deeply legally flawed, legally ineffective, and has no impact on our case,” Greg Varallo, a lawyer for the disenchanted Tesla shareholders who have challenged Musk's pay in court, a statement said.

With the pay package, Musk would own 20.5% of Tesla, up from about 13%. He has said he would like a 25% stake, stressing in January that it would be “enough to be influential, but not so much that it can't be overthrown.” If he didn't get such a large stake, he said, “he would rather build products outside of Tesla.”

Even after this week's rally, Tesla shares are down more than 20% this year, versus a 14% gain in the broader stock market. The company remains by far the most valuable auto company, with a stock market value of $600 billion, but fears of tougher competition and declining demand for its models have weighed on the stock.

At Thursday's shareholder meeting, Musk was characteristically optimistic about Tesla's self-driving technology, including the promise of a fleet of robotaxis, and said the company's humanoid robot, Optimus, would grow to become a multi-billion dollar business in its own right.

Market analysts are divided on the direction Tesla will take, with about 40% rating the stock a “buy,” 20% a “sell” and the rest a “hold,” according to FactSet. The range of price predictions is wide, and the average is roughly where the stock is currently trading.

Bernstein's price target implies a 30% decline, and analysts rate the stock as “underperform.” Others are more optimistic: Wedbush analysts think the stock could rise 50% from here, rating it “outperform.” The result of the pay vote was a “pork the champagne moment,” they wrote. “Tesla is Musk and Musk is Tesla.”

Peter Eavis AND Michael J. de la Merced contributed to the reporting.

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