In premarket trading, Tesla's shares surged following Elon Musk's announcement that shareholders are likely to approve his contentious $56 billion compensation package and a proposal to relocate the electric car manufacturer's incorporation to Texas. As of 04:49 a.m. ET on Thursday, Tesla's shares were up by 6.85% in premarket trading. Shareholders of Tesla have been participating in voting on two resolutions, with the opportunity to weigh in up to the company's annual meeting on Thursday.
The first resolution being evaluated pertains to the approval of a $56 billion compensation package that shareholders originally endorsed in 2018 but was invalidated by a Delaware judge in January. The second resolution involves the potential transfer of Tesla's state of incorporation from Delaware to Texas.
This suggestion arose after Musk polled his followers on the social media platform X earlier this year, receiving a significant number of yes votes. Musk has indicated that both these resolutions are currently garnering substantial support, although specific details have not been disclosed.
The initial compensation package included ambitious targets for Tesla's financial performance and market valuation. While Tesla has ascended to become one of the leading electric automakers globally, significant changes have occurred since the package was initially proposed in 2018.
Tesla is encountering decelerated growth and heightened competition, particularly from Chinese competitors. During this period, Musk has ventured into new endeavors such as acquiring Twitter, now known as X, and intensifying efforts in other ventures like Neuralink, a brain-computer interface firm, and xAI, an artificial intelligence company.
Critics of the compensation deal argue that Musk's attention is divided due to his diverse interests, and they deem the package, which stands as the largest in U.S. corporate history, as excessive. Recent critiques point out that Tesla's financial performance has not met expectations.
Some prominent shareholders have expressed intentions to vote against the deal, and leading proxy advisors Institutional Shareholder Services and Glass Lewis have also recommended voting against it. The California State Teachers’ Retirement System, a substantial pension fund, has objected to the compensation package, citing its excessive nature. Norway's sovereign wealth fund has also voiced opposition.
Supporters of the compensation package contend that Musk is crucial to Tesla's future success and argue that the billionaire may redirect his focus elsewhere if not adequately compensated. They assert that the compensation package serves as motivation for Musk.
Billionaire investor and long-time Tesla shareholder Ron Baron has declared his support for the pay package, emphasising Musk's pivotal role in the future of the EV maker. Despite this, major investors like Vanguard and Blackrock have not yet disclosed how they intend to vote on the matter.
Source: CN
https://www.cnbc.com/world/BC
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https://www.cnbc.com/world/BC
