Tesla finds itself under intense scrutiny this week as its annual shareholder meeting approaches on June 13th. A key issue on the agenda is Elon Musk’s controversial 2018 compensation package, previously approved by shareholders but recently challenged in court.
Court Rejects, Shareholders to Decide Again?
The 2018 pay plan, which ties Musk’s compensation to Tesla’s performance, received initial shareholder approval with a 73% vote. However, a Delaware court ruling in January sided with shareholders who contested the package. The judge argued that Tesla’s board failed to demonstrate the plan’s fairness.
Now, the company seeks renewed shareholder endorsement. Opinions are divided on the outcome. Analysts like Wedbush’s Dan Ives predict a repeat of the 2018 approval, considering Tesla’s planned incorporation in Texas, potentially rendering the Delaware ruling irrelevant. Barclays leans towards approval as well, though with less certainty after Norway’s sovereign wealth fund announced its opposition.
Potential Rejection and Fallout
Baird analysts present a contrasting view. They warn of a realistic scenario where the pay package is rejected. This could be due to factors like retail investors abstaining from voting or simply following proxy recommendations.
A rejection scenario carries significant weight. Tesla would be forced to adjust its financial statements retroactively, lowering share count and general & administrative expenses. More concerning, Baird predicts a potential share price drop of at least 5%, fueled by fears of Musk leaving the company.
This isn’t the only concern for investors. The meeting could also see significant updates on Tesla’s autonomous driving ambitions, particularly regarding the planned robotaxi fleet rollout scheduled for August.
Robotaxi Plans and Industry Implications
With whispers of a robotaxi event on the horizon, analysts are urging investors to consider potential buying opportunities for Uber (UBER) and Lyft (LYFT) in case of robotaxi-related selloffs in Tesla’s stock. The prevailing view is that a truly disruptive robotaxi market remains years away, offering a window of opportunity for established ride-hailing companies.
Uncertainties and Potential Turbulence
The upcoming shareholder meeting is rife with uncertainties. The fate of Musk’s pay package, combined with updates on the robotaxi project, could trigger significant volatility in Tesla’s share price. While some analysts are optimistic, others warn of potential turmoil, including a legal battle between Musk and Tesla if the compensation plan is rejected. This week will be crucial for Tesla and its investors as they navigate these critical decisions and their impact on the company’s future.