The world is about to find out if Tesla shareholders reapproved a $56 billion pay package for CEO Elon Musk. As before the vote, Wall Street is split on how things might turn out.
Shareholders of the electric-vehicle maker are reconsidering Musk's 2018 CEO performance award, which was approved by more than 70% of shareholders in 2018 and gave him some 300 million incentive-laden stock options. A Delaware judge, however, voided the pay package in January citing inadequate disclosures made to Tesla investors. Tesla's board put the same package up for another vote with new disclosures.
Most of the votes will be tallied on June 13 at Tesla's annual shareholder meeting.
Monday, Bernstein analyst Toni Sacconaghi wrote that shareholders are unlikely to approve the pay package. He believes that institutional investors who control 25% of the vote will follow the no-vote recommendation of proxy advisors ISS and Glass Lewis. (In 2018, both had also recommended voting against the deal.)
By his math, with 25% of no votes, for Musk to get his package, three-quarters of the remaining votes likely to be cast would have to be in favor.
Sacconaghi sees shares slipping more than 5% if the final vote is no. He rates Tesla stock at Sell and has a $120 price target.
One interested party thinks getting the pay package approved isn't as difficult as Sacconaghi believes. Musk tweeted Saturday that "roughly 90%" of retail shareholders had voted in favor of his compensation package. That would be significant because about 45% of shares available for trading that aren't held by Tesla insiders including Musk are owned by retail shareholders, according to Bloomberg.
If Musk's tally is correct, only about one in five institutional votes would have to be in favor for him to get his compensation package.
It's a question of how the institutional votes will shake out. Calpers and Norway's sovereign-wealth fund are against the deal, but Baron Capital and ARK Invest are in favor.
There are vocal shareholders and analysts on both sides. Sacconaghi's prediction for a no vote is countered by Morgan Stanley analyst Adam Jonas who sees a yes. Jonas says surveyed clients expected a yes vote by a two-to-one ratio.
Jonas rates Tesla stock at Buy with a $310 price target. Wedbush analyst Dan Ives also has a Buy rating, and a $275 price target.
Ives wrote this past week that a yes vote is more likely. "This issue has been an overhang on Tesla's stock and this will be important to move this distraction in the rearview mirror."
Overhang might be an understatement. If the package is voted down, the board would have to figure out a new way to compensate Musk, and shareholders would have to vote on CEO compensation all over again. More important, Musk's reaction to a no vote can't be predicted.
Coming into Monday trading, Tesla stock was down about 29% so far this year, underperforming the Nasdaq Composite by about 43 percentage points.
Musk's compensation isn't the only thing weighing on investor sentiment. Slowing EV sales growth resulted in lower delivery and earnings estimates for the EV giant.
Tesla stock was down 0.5% in premarket trading Monday while S&P 500 and Nasdaq Composite futures were both down 0.1%.
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