Tesla shareholders gave a big thumbs-up to CEO Elon Musk’s controversial $56 billion pay package, the company said on Thursday.
This is paving the way for the mogul to keep his focus on his biggest source of wealth.
Shareholders also approved a proposal to move the company’s legal home to Texas from Delaware. Tesla announced this at its annual shareholder meeting in Austin, Texas.
Musk had tipped off late on Wednesday that the proposals were garnering huge support and thanked shareholders.
This development sent the electric vehicle company’s stock soaring by as much as six per cent after Thursday’s opening bell.
Tesla ended the day at $182.47, up nearly three per cent.
The approval marks a “pop the champagne moment for Musk and Tesla shareholders,” according to Wedbush analyst Daniel Ives.
“This removes a $20-$25 overhang on the stock in our opinion that has weighed on shares since the head-scratching Delaware ruling set this Twilight Zone soap opera on earlier this year,” Ives said in a note to clients.
The “yes” vote marked the latest twist in an ongoing legal war over Musk’s pay package.
Tesla is fighting to reverse Delaware Chancery Court Judge Kathaleen McCormick’s decision in January to void the compensation plan, which she called an “unfathomable sum.”
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After her decision, Musk threatened to build AI and robotics products outside of Tesla if he failed to gain enough voting control, which required the 2018 pay package to be approved.
The approval underscored the support that Musk enjoys from Tesla’s retail investor base. Many of them are vocal fans of the mercurial billionaire.
It serves as an endorsement of Musk’s tenure. It is also an acknowledgement that investors do not want to risk the company’s future.
“This vindicates Musk and allays some investor concerns around his waning interest in Tesla,” said Sandeep Rao, Senior Researcher at Leverage Shares, which owns Tesla’s stock.
The board said Musk deserves the package because he hit all the ambitious targets on market value, revenue and profitability.
Large investors including the California Public Employees’ Retirement System had called the pay package “excessive.”
Musk could still face a long legal fight to convince McCormick. He may also face fresh lawsuits on the package, which would be the largest in US corporate history.
“The approval suggests shareholders think he’s the only person with the best strategy to implement going forward,” Jason Schloetzer, a business professor at Georgetown University with expertise in corporate governance said.
“They are brushing aside essentially key man risks, where Tesla has become even more dependent on Musk going forward.” (NY Post)
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