Stocks in Tesla Inc. could go up after Thursday, when shareholders vote on CEO Elon Musk’s huge pay package, unless they vote against it.
Thursday is the day of the vote on whether to give Musk the controversial $56 billion package. Musk said that a huge majority of small shareholders are in favour of the pay package. However, some institutional investors, proxy advisors, and even judges are against it.
Ben Kallo, a research analyst at Baird, said that about 45% of Tesla’s shareholders are institutions, 42% are individual investors, and the rest are people who work for the company. As some shareholders and advisors make noise, Kallo wrote in a note to clients, “We expect the proposal to pass.”
Kallo thinks that if the package doesn’t pass, it could hurt the stock of the electric car giant Tesla (TSLA, -1.80%) because Musk might not be able to focus on Tesla’s projects, especially when it comes to AI.
In a note to clients, Kallo said, “If the proposal is turned down, we expect shares to trade down.” “Musk has said in the past that [Tesla]-related AI would stay with [Tesla]. However, failing to approve the compensation plan will likely make it less clear that Musk is still committed to these projects, which we would see as a bad thing.”
As of Tuesday morning, Tesla’s stock had dropped 2.3% and was close to its lowest level in a month. Even though it has gone up 19.5% since April 22, when it hit a 15-month low of $142.05, it is still down 31.7% for the year, making it the only one of the “Magnificent Seven” tech giants that is down this year.
According to Kallo, a yes vote would “reduce an overhang on the stock” and ease some worries about Musk’s attention to the company. However, it would not mean the end of the story that started when a Delaware court threw out the pay package.
Kallo said that another good thing about the package is that if it passes, Tesla would only have to pay about $2 billion in accounting fees instead of about $25 billion to make a new compensation plan.
Also up for a vote is a plan to change the company’s home state from Delaware to Texas.
Kallo wrote, “We think this is a less important proposal and expect the vote to pass.”
