Tesla Inc. shareholders overwhelmingly approved CEO Elon Musk’s huge pay package late Thursday night. This was a big win for the electric vehicle maker, even if it was just symbolic, and it gave the company the green light to move its headquarters from Delaware to Texas.
The vote on the pay package was only advisory and had no legal weight. In premarket trading on Friday, Tesla shares TSLA, -2.44% went up 0.8%. This comes after rising 6.9% in the last two sessions.
After the results were read, Musk took the stage to cheers and chants of “Elon, Elon!” from the shareholders who were there.
Musk said, “First, I want to say, ‘Holy crap, I love you guys.'” “We are not just beginning a new part of Tesla’s story; we are beginning a whole new book.”
The pay package passed with 1.7 billion votes in favour, 528.9 million votes against, and 20.6 million shares that did not vote. The number of “yes” votes was about 76% of all the votes cast in person or by proxy.
Musk said that his goals for self-driving cars are “mind-blowing” and something that big shareholders don’t really get.
He also said that Tesla’s knowledge “far” exceeds that of companies like Apple Inc. AAPL, -0.82%, Meta Platforms Inc. META, +0.11%, and Nvidia Corp. NVDA, +1.75% when it comes to humanoid robots, AI, and even chip-making.
Before the meeting, most people thought that a “no” vote on the pay package would be bad for Tesla. On the other hand, a “yes” vote would give people hope that they could win any legal action against the Delaware court decision from January that threw out the package.
Forbes analyst Garrett Nelson said that the news on Thursday takes away “a potentially disastrous scenario” in which Musk would quit Tesla and choose to spend more time on his other businesses.
“The news takes away a big cloud over the shares, but we wouldn’t be surprised if there was a “sell the news” reaction on Friday after big gains over the last two trading days as it became clearer what would happen,” he said.
By voting for the package, shareholders sent a strong message that “a deal is a deal” and that Musk should be rewarded for meeting the high standards of an entirely incentive-based contract, as he put it.
The analyst said, “The legal battle over the compensation plan is far from over, but we think the vote makes Tesla’s case much stronger.”
No matter what the vote was, Tesla knew that there would be a lot of legal grey areas.
The company said in proxy materials that “even a favourable vote by our stockholders to ratify the 2018 CEO performance award may not fully resolve the matter” and that it was impossible to know for sure how a vote by stockholders to ratify the 2018 CEO performance award would be handled under Delaware law in these unique situations.
For weeks, Musk and other top Tesla executives had been trying to get individual investors to support the CEO pay package. However, a few large institutional investors and two influential proxy advisers spoke out against it.
In proxy materials, Robyn Denholm, Chair of the Tesla board of directors, said that restoring Musk’s pay was “a matter of fundamental fairness and respect to our CEO.”
Denholm was one of the first people to speak at the meeting in Austin, Texas. She praised Tesla’s investors, telling them, “No other shareholder base understands the company as you do.” The owner of the business is you.
Musk said late Wednesday night on X that his pay package and the plans to re-incorporate in Texas were both passing by “a wide margin.”
4.1 billion votes were cast in favour of moving to Texas, while only 449.6 million votes were cast against it.
The shareholders also agreed to keep James Murdoch and Kimbal Musk, Elon Musk’s brother, on the board.
There were 1.57 billion votes for Murdoch and 710.7 million votes against. On the other hand, there were 1.81 billion votes for Musk and 469 million votes against.
Citi analyst Itay Michaeli said in a note earlier Thursday that he was “staying neutral” on the shareholder vote. However, he said that Tesla share prices could get better in the coming months “if the story can pivot towards new products” and if the company’s Aug. 8 “robotaxi” event “can provide a more credible AV deployment plan” that shows that Tesla has “distinct advantages” in that area.
The S&P 500 index SPX has gained about 14% so far this year, while Tesla shares have lost about a quarter of their value.
