[Moo Brief] TSLA shareholder meeting preview: Will Musk secure his $56 billion compensation and tighten grip on Tesla?

As $Tesla(TSLA.US)$ approaches its shareholder meeting, key decisions await your vote. On Thursday, June 13, 2024, at 3:30 PM CT, $Tesla(TSLA.US)$ will convene its Annual Shareholder Meeting.

Earlier this year, Musk's 2018 compensation plan met with a legal setback when a Delaware court ruled against it, casting a shadow over investor confidence in his leadership. A rejection of Musk's current pay proposal could signal growing investor unease about his stewardship of $Tesla(TSLA.US)$. However, it’s worth noting that the vote is advisory and not legally binding, leaving Tesla the discretion to heed or disregard shareholder suggestions.

Should the compensation plan gain approval, Musk’s stake in $Tesla(TSLA.US)$ could skyrocket from 13% to over 20%. Musk has publicly expressed, via his X account in January, his unease about escalating Tesla's lead in AI and robotics without substantial voting control: "I am uncomfortable growing Tesla to be a leader in AI & robotics without having 25% voting control. Enough to be influential, but not so much that I can’t be overturned," Musk stated. "Unless that is the case, I would prefer to build products outside of Tesla."

The 2018 pay package approved for Musk by $Tesla(TSLA.US)$ involved a series of 12 market capitalization and operational milestones. Achievement of all targets could grant Musk an accumulative 12% of Tesla's stock options, estimated at around $56 billion, making it one of the most colossal executive compensation packages in American history. At the time, reaching the final milestone—a market cap of $650 billion—seemed a herculean task, with Tesla's value at approximately $59 billion. Yet, following the announcement, $Tesla(TSLA.US)$’s valuation hit the fast lane, briefly exceeding $1 trillion in 2021.

In 2022, some $Tesla(TSLA.US)$ shareholders took Musk to court, accusing him of diverting his focus to other ventures like SpaceX and leveraging his influence to secure the long-term pay plan. Consequently, a Delaware judge deemed Musk’s compensation plan unfair to shareholders in January.

In response, Musk has suggested relocating $Tesla(TSLA.US)$'s state of incorporation from Delaware to Texas. As the drama unfolds, the upcoming shareholder meeting is not only a litmus test for Musk's vision but also a potential turning point for $Tesla(TSLA.US)$'s future. The outcomes could reshape the company's trajectory and redefine Musk's role in spearheading the burgeoning fields of AI and robotics within the automotive industry.