Elon Musk is one of the richest people in the world – but could be several dozen billion dollars richer. But a Tesla share package granted in 2018 is hanging in the balance.
For Tesla boss Elon Musk, a lot of money is at stake today. The shareholders of the electric car manufacturer will once again vote at the annual general meeting on a billion-dollar share package for the 52-year-old.
The compensation plan had already been approved by shareholders with a majority of 73 percent in 2018. But a judge in the US state of Delaware overturned it in January following an investor lawsuit.
She concluded that Musk had too much influence behind the scenes in the negotiations over the generous compensation of the Tesla board of directors to be able to speak of a fair process. Since the shareholders were kept in the dark about the entanglements, they had no opportunity to make a well-considered decision, the judge argued.
Tesla again well below peak values
The value of the package was given at the time as around 56 billion dollars, but that was more of an estimate based on the specifications. Musk essentially got the right to buy a good 300 million Tesla shares in small chunks at the 2018 price if the company met some ambitious goals over a period of up to ten years.
Among other things, the market value was supposed to rise from a good 50 billion dollars to 650 billion dollars. After rapid growth and thanks to the electric car euphoria at the time, Tesla quickly reached the mark and was even worth more than a trillion dollars at times – making Musk’s compensation package around 100 billion dollars. Demand has now cooled noticeably and Tesla is now worth around 575 billion dollars on the stock market.
In recent weeks, Tesla has repeatedly appealed to shareholders to approve the package again. Chairman of the Board Robyn Denholm argued that this would only be fair, as Tesla’s value had risen so much with Musk at the helm. In addition, he could also invest his time in other companies, Tesla warned investors. The busy tech entrepreneur runs the space company SpaceX, among other things, and is the owner of the online platform X.
Referendum on Musk’s leadership
The vote on the large share package will thus become a kind of referendum on Musk. Some shareholders have criticized him in recent months for not paying enough attention to Tesla – and instead getting involved with X and causing controversy with political statements that take up the positions of the American right. Meanwhile, Musk has hinted that he would like to control Tesla with a 25 percent share of the voting rights before investing a lot of energy in the development of artificial intelligence. He currently has a 13 percent share of the voting rights.
According to what major shareholders have said so far, it could ultimately come down to the votes of private investors. Tesla also expressed uncertainty in the documents for the annual general meeting as to whether the package could be restored simply with a shareholder vote following the court decision.
However, a positive decision is likely to help Tesla’s appeal against the judge’s decision. The company could argue that the proceedings have now made shareholders aware of the closeness between Musk and the board members.
In another point, shareholders will also vote on the relocation of the company’s registered office from Delaware to Texas, where the large Tesla factory is located. However, a move would have no impact on Musk’s compensation since 2018.
Source: Stern
