TESLA WANTS SHAREHOLDERS TO CLEAR ELON MUSK'S $55 BN PAY PACKAGE REJECTED BY JUDGE

Tesla will ask its shareholder to approve CEO Elon Musk's $56 billion package in its annual meeting in June, according to Associated Press.

The package was rejected by a judge in the US state of Delaware earlier this year.

In the same annual meeting, Tesla will also seek approval to move the company's corporate home from Delaware to Texas, according to the report. In 2021, Tesla moved the company's headquarters to Texas.

The latest move by Tesla comes after a judge in January ruled that Musk was not entitled to the $56 billion package. The ruling came in a five-year-old shareholder lawsuit that argued the package was void because it was dictated by Musk and was the product of sham negotiations with directors who were not independent of the company, according to AP.

Following the ruling, Musk announced that he would try to change Tesla's state of incorporation to Texas. He also did the same with his privately-held brain implant company Neuralink after the ruling.

In a letter to shareholders this week, Chairperson Robyn Denholm said that Musk has delivered on the growth for Tesla and that the company was meeting all of the stock value and operational targets in a 2018 CEO pay package that was approved by shareholders, according to the AP report.

"Because the Delaware Court second-guessed your decision, Elon has not been paid for any of his work for Tesla for the past six years that has helped to generate significant growth and stockholder value. That strikes us — and the many stockholders from whom we already have heard — as fundamentally unfair, and inconsistent with the will of the stockholders who voted for it," wrote Denholm.

In 2023, Tesla indeed posted record deliveries of over 1.8 million electric vehicles (EVs) across the world, but the value of shares has fallen this year as EV sales have softened. Moreover, the shares of Tesla are currently trading at nearly a 12-month low amid soft sales.

Since last year, Tesla has cut prices as much as $20,000 on some EV models it sells. The cuts led to drop in margins of the company.

The report further noted that future growth at Tesla is in doubt. It further said it may be a challenge to get shareholders to approve Musk's package "in an environment where competition has increased worldwide and demand for electric vehicle sales is fading".

Wedbush analyst Dan Ives was quoted as saying in the report that when Tesla announces first-quarter earnings next week, Musk would need to spell out plans for future growth of the company, including the status of the Model 2, a small EV that costs about $25,000.

Otherwise, dark days lie ahead, warned Ives.

"Investors are not just taking Musk's word. There's a feeling like the plane is crashing into the ocean and the board is focused on their own salted peanuts," said Ives, adding that he now has less leverage than he did in January because of this year's downslide of shares.

Ives further said, "He went from Cinderella story to the Nightmare on Elm Street in a matter of six months," Ives said.

2024-04-17T18:27:14Z dg43tfdfdgfd