Wedbush Securities said Thursday that Tesla (TSLA) CEO Elon Musk’s assertion about getting shareholder approvals for his 2018 remuneration package and another important resolution is a “pop-the-champagne” moment for him and shareholders and likely eliminates the stock’s overhang
Musk wrote on X late Wednesday that Tesla shareholders approved his $56 billion compensation deal and proposals to shift the company’s incorporation to Texas from Delaware “by wide margins!”
The company’s shares rose 4.1% late Thursday. In 2024, the stock is down approximately 26%.
In 2018, shareholders approved Musk’s compensation package, but a Delaware court canceled it in January, calling it an “unfathomable sum.”
In a Thursday email to clients, Wedbush analyst Daniel Ives suggested the EV maker’s stock overhang may be reduced by $20 to $25. The brokerage anticipates the vote results “some time” before the annual shareholder meeting closes Thursday afternoon.
“We believe an overwhelming retail presence voting green light for both proposals was key to approval despite some large shareholders voting no,” he added. “Based on all of our discussions over the past month, large shareholders at the end of the day knew that voting no would risk Musk potentially eventually leaving as CEO, and the risk for overweighed the reward in voting no on this proposal despite some obvious frustration with Musk.”
The pay plan was opposed by proxy consulting companies Glass Lewis and Institutional Shareholder Services. Musk remarked on X earlier this year that he would be “uncomfortable” building Tesla to dominate AI and robots without 25% voting power. Tesla Chair Robyn Denholm wrote to investors last week that Musk’s compensation plan must be authorized to encourage him.
At the Thursday meeting, Wedbush expects Musk to discuss keeping Tesla’s AI programs “under the hood of Tesla despite some threats to the contrary,” the report said. “Now with this (compensation) package done, we would expect the board to look to get Musk to an incentive-driven 25% ownership of Tesla that should resolve this AI threat saga the last few months,” he wrote.
The message suggested Musk must recommit as Tesla CEO for three to five years and consider a sub-$30,000 car, among other projects.
Wedbush said demand issues remain for the firm despite Musk’s assumption of a probable shareholder vote triumph. “This is (a) pivotal period for Tesla and Musk to navigate this turbulent period to see improved demand, (full self-driving) success, and new model rollouts over the coming year,” he added.
Wedbush reaffirmed Tesla’s outperform rating and $275 price target.
