Elon Musk’s $56 billion compensation package is unlikely to be approved by Tesla shareholders, according to Bernstein analyst Toni Sacconaghi. The vote on Musk’s pay package will take place at the company’s annual shareholder meeting this week. If the package is rejected, Tesla stock could potentially fall by 5%.
Sacconaghi believes that it will be challenging for Musk to secure the necessary majority of votes from shareholders. Tesla’s highest voter turnout in the past has been 63%, and even if 75% of shareholders vote on the matter, it will still be difficult for Musk to gain approval. Proxy advisers have recommended voting against the compensation package, and passive investors, who make up approximately 20% of Tesla’s investor base, are likely to follow suit.
Chris Ailman, the CIO of CalSTRS, a prominent pension fund, publicly announced that he would vote against the pay package with his fund’s 4.6 million shares of Tesla. Ailman criticized the package as being excessive for a car company and stated that Musk’s attention might shift away from Tesla if it is not approved.
Sacconaghi also expressed concerns that Musk would become less engaged if the pay package is not approved. Musk has hinted that without more control, he may be hesitant to continue developing artificial intelligence at Tesla. Therefore, the vote on the pay package holds significant importance.
While a “no” vote could negatively impact Tesla’s stock in the short term, it would have a positive effect on the company’s earnings per share. Sacconaghi projected that Tesla’s diluted share count would decrease by approximately 9%, resulting in a 10% increase in earnings per share.
Sacconaghi currently rates Tesla as a “sell” with a price target of $120, suggesting a potential downside of 32% from its current levels. However, not all analysts agree with this viewpoint. Wedbush Securities analyst Dan Ivees believes that shareholders will overwhelmingly approve the compensation package.
In conclusion, the approval of Elon Musk’s $56 billion pay package is uncertain. While some analysts predict it will be rejected, others foresee overwhelming approval. The outcome of the vote will have implications for Tesla’s stock and Musk’s level of engagement with the company.
