A Delaware judge recently ruled to void Tesla Inc (NASDAQ:TSLA) CEO Elon Musk‘s 2018 compensation plan worth $55 billion.
After the judge's decision, Tesla's board has decisions to make, and some Tesla shareholders are showing their support for the automaker and its CEO, and have some ideas of their own.
What Happened: The judge's decision came after a Tesla shareholder challenged the compensation plan that tied Musk’s earnings to the performance of Tesla metrics like market capitalization, revenue and adjusted EBITDA.
The shareholder argued proper disclosures were not presented to investors before the plan was approved by shareholders and the company's board.
Organized by Amy Steffens (@_SFTahoe) and Alexandra Merz (@TeslaBoomerMama), who are Tesla influencers and shareholders, an effort to rally shareholders in support of Musk and the Tesla board is underway.
The duo helped gather signatures from 5,821 Tesla shareholders representing 23,337,127 TSLA shares. The signatures range form Tesla shareholders who own one share to investors with thousands of shares, as well as people have been shareholders since 2010 and more recently. The signatures were compiled over four days.
"And we are all Unanimous & United in our support of the Tesla Board of Directors and Tesla CEO Elon Musk," according to the letter sent Monday to Tesla's board.
The letter centers on three points: shifting Tesla’s state of incorporation from Delaware to Texas; the board exploring options to keep Musk’s 2018 pay plan in place; and the board designing a new plan along the same lines as the 2018 compensation plan that was struck down.
The shareholders envision a new compensation plan for the Tesla CEO that requires the automaker to achieve milestones such as full self-driving reaching level five autonomy; $500-billion or $1-trillion increases in Tesla’s value; or surpassing the combined value of Saudi Aramco and Apple. The proposed new plan would vest shares to Musk in order to grant him 25% or more of Tesla shares.
“If Tesla incorporates in a state allowing super voting shares, we endorse this, too,” the letter said.
Related Link: Tesla Q4 Earnings Highlights: Revenue Miss, EPS Miss, Model Y A Global Bestseller, Next-Gen Vehicle Update And More
Why It's Important: Wedbush analyst Daniel Ives recently said the compensation plan ruling is a tornado situation for Tesla's board.
Tesla's board could appeal the decision, create a new compensation package that replaces the 2018 plan or create an entirely new compensation package that brings Musk back to the 25% voting share he recently requested.
"We ultimately believe this decision will be a catalyst for the board to take the situation into its own hands and come up with a new comp package that could satisfy both shareholders and Musk helping put this 2018 comp package noise in the rear-view mirror," Ives said.
The support garnered from over 5,000 Tesla shareholders in a short amount of time could bode well for Tesla winning shareholder approval for a new CEO compensation plan.
Based on the wording of the shareholder letter, the signatories see Tesla returning to the $1-trillion market capitalization club in the future. The shareholders are also backing Musk's previous comments regarding Tesla becoming the biggest company in the world, more than Apple Inc (NASDAQ:AAPL) and Saudi Aramco combined.
Today, Apple and Saudi Aramco are worth $2.9 trillion and $2. trillion, respectively, and $4.9 trillion combined. Tesla has a market capitalization of $584 billion.
TSLA Price Action: Tesla shares are trading at $184.14 Tuesday versus a 52-week range of $152.37 to $299.29. Shares of Tesla are down 26% year-to-date in 2024.
Photo via Shutterstock.
Latest Ratings for TSLA
| Date | Firm | Action | From | To |
|---|---|---|---|---|
| Feb 2022 | Daiwa Capital | Upgrades | Neutral | Outperform |
| Feb 2022 | Piper Sandler | Maintains | Overweight | |
| Jan 2022 | Credit Suisse | Upgrades | Neutral | Outperform |
View More Analyst Ratings for TSLA
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