Written by Ross Kerber
(Reuters) – With Tesla Inc's (NASDAQ:) major shareholders appearing divided over whether to support Elon Musk's $56 billion pay package, the company is also looking for support from individual investors who make up an unusually high percentage of the industry's ownership base. Electric cars.
Small investors tend to favor management, but they often don't bother to vote, experts said.
The company's annual meeting on June 13 serves as a referendum on Musk's leadership, following a Delaware court ruling that voided the massive pay package. The company has asked investors to vote to reaffirm it, and Musk would control more than 20% of the company if he takes it. A “no” vote would be a reprimand with unknown consequences.
Tesla also proposes to reincorporate the company in Texas instead of Delaware and re-elect directors, including Musk's brother, Kimball.
While there are more than a dozen items up for voting, Tesla is focusing on paid voting and moving to Texas in an ongoing small shareholder outreach campaign that includes a website, engagement with online influencers, and factory tours for a few of those who vote.
Major investors have sent mixed signals. T. Rowe Price said the package demonstrated “strong alignment” with investors' interests. But the California Public Employees Retirement System, meanwhile, said it would likely oppose Musk's pay because it did not match Tesla's performance, and Norway's sovereign wealth fund opposed the pay package on Saturday.
Although small investors have a range of opinions, experts in corporate voting campaigns say the size and CEO-friendly nature of many of Tesla's individual investors make them an obvious target.
“The guy ended up multiplying my investment 10 times and gave nothing back? That doesn't seem right or fair,” said Andrew Teken Bench, an attorney in Allentown, Pennsylvania, who owns less than 5,000 Tesla shares, and who voted by proxy with management. All items in the meeting, including Musk's pay.
In a post on his social media platform
Support of 90% from retail investors would be “almost normal” given that the category generally favors management, said Bruce Goldfarb, president of Okapi Partners, a proxy lawyer who was not involved in that vote. But these investors usually don't vote, which poses a challenge for Tesla.
“Individual shareholders are largely indifferent even if they are supportive,” Goldfarb said.
Mom-and-pop investors voted just 30% of their shares in 2023, according to vote-processing firm Broadridge, compared with 80% for institutional investors.
The theme of fairness toward Musk is at the core of Tesla's campaign. Chairman Robin Denholm described the vote as being about “fairness, respect and the future of Tesla.” She also warned that Musk has limited time and diverse interests.
“We want those ideas, that energy, and that time at Tesla to be for the benefit of you, our owners,” she wrote in a letter dated June 5. “But that requires mutual respect.”
A Tesla representative declined to comment.
Pack driving
Data and research firm S&P Global Market Intelligence found that as of June 5, about 43% of Tesla's common stock is owned by a “general and other” shareholder class that includes individual investors and others outside the main categories of institutional and corporate investors. Insiders.
This is the largest number of any of the world's 15 largest companies.
Musk's stake in the company is about 13%. Among large outside investors, Vanguard owns 7.2% of the stock, and BlackRock (NYSE:) owns 5.9%, according to Tesla's proxy. Neither of them commented on their voting intentions.
Gut Evaluation: 50% chance
Both lead proxy advisors, Institutional Shareholder Services and Glass Lewis, have recommended investors vote against ratifying the pay package, calling it excessive.
This is a bad sign for Tesla. Among Russell 3000 companies from 2010 to 2020, only 66% of “say-on-pay” resolutions passed when both advisors recommended the agency vote against them, compared to 99% when they both supported wages, said Zhong Xu, a professor of finance at the University of Utah.
Omar Qazi, an X.com user with 475,300 followers who posts using @WholeMarsBlog and often gets public responses from Musk on the platform, said his “internal assessment” is that there is only a 50% chance the majority of Tesla investors will return. Recertification of Musk's pay.
“Many support Musk and see the importance of his compensation, but many are also upset by a variety of factors: politics, slowing sales, stock prices, etc.,” Qazi said via direct message on Channel X.
Tesla shares closed Friday at $177.48, well below the $248.48 where they ended trading in 2023, as the company faces increasing competition and questions about its plans for new models.
A deal is a deal
However, Musk still enjoys online support from influential users. In addition to Qazi, these personalities include Alexandra Merz, who posts as @TeslaBoomerMama on X.com and Musk has retweeted several posts to bring attention to the vote.
These posts urged non-US banks and brokerage firms to allow Telsa investors to vote, something the companies' regulations had not previously allowed. Many have since done so, including Sweden's Nordnet.
Troy Dillon, a retired US Air Force officer in Florida, said: “I've invested in other companies before and I've never seen the amount of effort an informal community puts in to get a vote out like in this company.” Tesla shareholder.
As for the pay package, Dillon said: “The deal was the deal.” He votes for her.
