Once the king of the EV sector, Tesla (NASDAQ:TSLA) stock has seen its fervor diminish. The aura around Elon Musk has become mixed, with the Tesla CEO sending interesting messages to his former client base, and ongoing drama around his $56 billion pay package poised to rattle some of the company’s investors and patrons.
To add fuel to the fire, a lot of investors are pointing their fingers to CEO Elon Musk. Market analysts think Musk is the reason Tesla is sinking because of his continuous controversies and questionable judgment.
Shareholders also worry about his ventures like Cybertrucks and robotaxis, hindering Tesla’s financials in a difficult market.
Notable individuals and firms criticize Musk’s substantial proposed pay package. Here’s more on what’s going on with this debate.
Elon Musk is Confident Shareholders Has His Back
June 13 will be a most-awaited day for Tesla shareholders as they will determine whether Musk’s $56 pay package gets approved. Musk, feeling confident he’s got the support he needs, said in a tweet that 90% of Tesla’s retail shareholders have declared support for his package. This makes the reapproval more likely to happen.
Meanwhile, CalPERS, Norway’s sovereign wealth fund, ISS, and Glass Lewis have opposed the pay package. On the other side of the ledger, Baron Capital and ARK Invest supported the deal. However, neither is among Tesla’s top 15 institutional holders.
In 2018, over 70% of shareholders approved Musk’s $56 billion stock option package, which was voided by a judge in January for inadequate disclosures. The board will also resubmit new disclosure valued over $50 billion, and results are anticipated by June 13.
Currently, Musk holds 13% of the overall Tesla shares in the market. The stock saw a 29% decline year-to-date because of slow EV sales, and investors will certainly have to watch how this whole debacle affects his net worth (and his financing package for his Twitter buyout as well).
Norway Fund Votes Against Pay Package
Tesla’s eighth-largest shareholder Norway sovereign wealth fund already declared to vote against Musk’s pay package. The said wealth fund is valued at $1.7 trillion.
The fund acknowledged the value Musk generated since 2018 but cited concerns over the award’s size, structure, dilution, and key person risk. In 2018, they also opposed the package. NBIM emphasized ongoing dialogue with Tesla on these and other issues.
With a 0.98% stake worth $7.7 billion, the fund criticized excessive CEO pay. Musk responded, calling the decision “not cool” on social media. The fund voted against many CEO pay packages over $20 million last year, supporting a proposal for Tesla to adopt labor rights policies.
Avoid TSLA Stock and Run
Tesla’s June 13 annual meeting becomes a test of Musk’s leadership after a court invalidated his substantial pay package. Investors decide whether to reaffirm it, potentially granting Musk over 20% control. A ‘no’ vote signals discontent, with consequences uncertain.
Both major proxy advisers, Institutional Shareholder Services and Glass Lewis, advised against ratifying the pay package, deeming it excessive — a concerning development for Tesla. Data from 2010 to 2020 shows a significant difference in “say on pay” resolution success rates based on proxy advisers’ recommendations. These signs should not be taken lightly.
It’s my view that Tesla isn’t a stock that’s cooked quite yet. But if enough headwinds line up together, as they appear to be doing, it’s possible that investors could be due for a ride to the bottom from here.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
