Although Tesla (TSLA) shareholders voted Thursday afternoon to reinstate Elon Musk’s pay package, some investors and analysts told Yahoo Finance they remain skeptical.
“This is all just a game of chicken and the shareholders blinked,” said Ibrahim AlHusseini, an early Tesla investor. “Fear of losing is a great motivator and Elon used this psychological mechanism to his advantage.”
The venture capitalist said he voted half-heartedly in favor of the $56 billion plan.
“The deal was done in 2018 when the steps seemed virtually impossible and he met them,” said AlHusseini, who first invested in Tesla in a Series C funding round. made a deal, he kept it, and that’s his reward.”
Tesla’s stock has fallen nearly 30% since the start of the year and was down about 2.5% on Friday. Now that the vote is complete, AlHusseini said the stock is expected to remain stable until the next quarterly results are released, where he expects “shares to fall due to further lack of deliveries and margin.”
Tesla said 77% of respondents voted in favor of Musk’s pay plan. According to the filing, investors who held 1.76 billion shares voted in favor of the deal, while 528.9 million shares voted against. 20.6 million shares were not voted on.
“I just want to start by saying, damn, I love you guys,” Musk said on stage at the shareholders meeting. The package, made up of options, was initially valued at $56 billion, but its value is now around $46 billion due to Tesla’s declining market capitalization.
In January, Delaware Court of Chancery Judge Kathaleen McCormick ruled that the original pay package, which was approved by 73% of the shares voted in 2018, was not fairly negotiated.
Voting to reinstate the package does not necessarily mean Musk will get the historic payday. A yes vote does not resolve the legal challenge and is unlikely to change the judge’s mind. Legal experts say the final decision will be up to the Delaware Supreme Court and Chancellor’s Office.
New York City Comptroller Brad Lander, who was among the shareholders who requested a vote against the project, called the approval a “mistake.” Land several pension funds overseas that own about 3.4 million Tesla shares.
“We’ll see how Musk moves forward, whether that leads him to focus on Tesla and develop clear growth plans,” Lander told Yahoo Finance. “But if it becomes another battle, a distraction, a Twitter feud and even more ego, it won’t be a good thing.”
Tesla’s largest outside institutional shareholder, Vanguard, played a crucial role in pushing the deal through. Vanguard, which owns 7% of Tesla’s stock, initially voted no in 2018, citing concerns about the company’s size relative to business performance.
Longtime Tesla investor Ross Gerber questioned Vanguard’s decision. “Index funds are supposed to represent the public and often have corporate governance expectations of companies. It seems a little strange that they voted in favor of the pay package and said it would work. aligns with shareholder incentives – which it does, but at an outrageous price.” ” he told Yahoo Finance.
Gerber, who co-founded investment firm Gerber Kawasaki, voted yes in 2018 but argued no this time. He began investing in Tesla in 2014 and his company held 332,000 shares as of March 31.
“The package is outrageous and his performance has been terrible over the last three years,” Gerber said. “But I believe in elections, so if that’s what the shareholders want, that’s great.”
Investors also passed a proposal to reincorporate Tesla from Delaware to Texas, something Musk pushed for after the judge struck down his pay deal.
“That’s part of the distraction problem,” Lander said. “Delaware has a relatively conservative set of laws that provide the foundation for shareholder capitalism. To then pack up and move to Texas because you’re pissed at a judge who told you you had to follow the rules, the question is how are you going to reset?
Lander says he sees a solid foundation for Tesla to build on despite some worrying signs, adding that they have no immediate plans to change their investment strategy.
“Elon deserves a lot of the credit,” Lander said. “Not a $56 billion share, but a very significant share.”
Analysts say shareholders’ decision to reinstate Elon Musk’s compensation package is a win for investors.
Canaccord Genuity Chief Executive Officer George Gianarikas, who has a buy rating on the stock, told Yahoo Finance he was “very encouraged” by the vote of confidence in Musk’s leadership.
“Elon Musk is essential to Tesla’s success in the past and in the future,” Gianarikas explained.
Gianarikas said Tesla’s prospects for developing fully autonomous driving set the automaker apart from its competitors, putting the company in an “incredibly enviable position.”
Wedbush’s Dan Ives, a longtime Tesla bull, described the approval as a “champagne moment” for Musk and shareholders. He said approving the pay package removes a $20 to $25 surplus on the stock.
“This is just the beginning of the next chapter, as Musk calls it, in Tesla’s growth story. It’s one of the most disruptive names in the world,” Ives said. “It’s one of the best AI games on the market.”
Ives, who warns that a no vote could have caused Musk to leave Tesla, estimates that Tesla’s valuation will exceed $1 trillion in 2025 as Musk devotes more time and focus to the automaker.
“Now you see Musk going back to the old school…Tesla needs Musk and Musk needs Tesla,” Ives added.
But Dave Harden, Summit Global’s chief investment officer, cautioned against buying Tesla stock just yet.
“It represents significant dilution opportunities for shareholders, and it creates incentives for some to want to do risky things,” Harden said.
The company has no track record in AI and robotics, and its strong growth in the electric vehicle sector has already happened, Harden says.
“I think there’s going to be a lot more discussion and a lot more opportunity to step up when you clearly see that growth is going to happen,” Harden said.
“I would recommend holding Tesla and waiting. If you are in stocks, I would probably sell,” he added.
Yasmin Khorram is a senior reporter at Yahoo Finance. Follow Yasmin on Twitter/X @YasminKhorram and on LinkedIn. Send newsworthy tips to Yasmin: yasmin.khorram@yahooinc.com
Sean Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Advice on deals, mergers, activist situations or anything else? Email seanasmith@yahooinc.com.
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