Some major shareholder groups are already taking sides in the Elon Musk pay-package controversy, set for a vote this Thursday, June 13. Indeed, on Monday, Christopher Ailman, Chief Investment Officer at California State Teachers’ Retirement System (CalSTRS), announced that the large pension fund will vote against Musk’s gargantuan compensation package. Can Musk still walk away with the $56 billion?
Well, probably not, at least, according to Wall Street analysts. CalSTRS owns close to 4.7 million shares of Tesla (NASDAQ:TSLA) as of June 2023. CalSTRS’ public opposition to the pay package has considerably slimmed Musk’s chances of receiving the major windfall.
In an interview on Monday, Ailman recommended that Musk focus on enhancing his businesses.
“This is a company that has not grown in the last two years, is barely making money per car itself,” Ailman said. “He needs to focus in either on cars either on X or on going to Mars. And I think his heart really is in going to Mars and getting off the planet.”
Elon Musk Pay Package Receives Slim Odds From Wall Street
Unfortunately for Musk, the loss of CalSTRS may prove the stake in the heart of the pay package. Not that he had much of a chance, even prior to the announcement.
Musk’s major issue isn’t just votes against the package but shareholder votes in general. As part of the terms for the shareholder vote, Musk will need the majority of all voting shareholders to vote in favor of the package for it to go through. Unfortunately for him, many shareholders neglect to vote at all.
In fact, Tesla’s highest voter turnout yet has been only 63%. Even assuming the public nature of this week’s vote attracts a higher number of voters, the math isn’t exactly in Musk’s favor.
Worse even, two shareholder advisory firms have publicly recommended against the package, claiming it stands to dilute shareholder value. This will make it hard to get the simple majority needed to approve the compensation.
Some are concerned about the potential repercussions of a failed vote. Indeed, some speculate that TSLA stock could lose even more shareholder value should the proposal be rejected. Others fear Musk will quit the job in protest of the voting results.
“There is a concern that Elon Musk would become less engaged. He’s implicitly threatened that if he didn’t have more control he would be concerned about developing AI at Tesla, so it’s a significant vote,” said Bernstein analyst Toni Sacconaghi.
On the date of publication, Shrey Dua did not hold (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.
