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Tesla shareholders are set to finally reveal whether or not CEO Elon Musk’s $46 billion pay package will be reapproved on Thursday, some five months after it was struck down by a Delaware judge.
If investors re-approve the plan, it could pave the way for Musk to buy up to 304 million Tesla shares. The plan is currently valued at $46 billion, making it the biggest executive compensation plan in U.S. history.
Several institutional investors have made their votes known, both for and against Musk.
Norges Bank Investment Management, CalPERS, and funds represented by New York City Comptroller Brad Lander will vote against the compensation plan. Scottish Mortgage Investment Trust, Cathie Wood’s ARKInvest, and major investor and Tesla bull Ron Baron have all taken Musk’s side ahead of the meeting. According to Musk, 90% of retail shareholders that have already voted did so in his favor.
But what does that mean for Tesla stock, not to mention its future? Here’s what analysts have to say.
Wedbush Securities
Longtime Tesla bull and Wedbush Securities analyst Dan Ives expects Thursday to be a smashing success, predicting that Musk’s compensation will be “overwhelmingly approved,” according to a June 6 research note. He’s also calling for Tesla to move on from the pay battle, citing its negative effect on Tesla’s stock.
Ives has also laid out a playbook he thinks Musk would be wise to follow, beginning by taking advantage of the hype surrounding Tesla’s Aug. 8 robotaxi event. Ives is also calling for Musk to commit to artificial intelligence development at Tesla — rather than at his xAI startup — and officially say he will remain as Tesla’s CEO for the next three to five years.
Wedbush last week maintained its outperform rating on Tesla’s stock and issued a $275 per share price target.
JPMorgan Chase
JPMorgan Chase analysts led by Ryan Brinkman say they suspect that investors will approve the deal, although with less than the 73% approval rate it had in 2018 and “perhaps by a lesser margin than popularly imagined,” according to a June 11 research note.
Brinkman cites similarities between Thursday’s vote and the 2016 acquisition of SolarCity: Some investors voted in favor of the deal not because they supported it, but because they were afraid of the impact on Tesla stock if it was rejected.
Musk is tied to Tesla on an extreme level, which suggests a high risk, Brinkman added. If Musk’s pay is struck down, diluted share count may grow more than 10%, but a departure by Musk could wreck the stock price.
“Investors voting to disapprove the compensation plan would seem to be betting that Mr. Musk would then not leave Tesla (we are uncertain whether he would or would not),” Brinkman said.
J.P. Morgan on Tuesday maintained its underweight rating and issued a $115 per share price target on Tesla’s stock.
Morgan Stanley
Morgan Stanley analyst Adam Jonas has said that Musk’s compensation will likely be ratified, noting that surveyed clients expect a “yes” vote by a by a two-to-one ratio.
In a June 4 note to investors, Jonas warned shareholders that they should be prepared for the company to “significantly slow down/curtail its direct investment in sensitive/advanced AI efforts,” if the compensation does get rebuffed. Musk wants 25% voting control before Tesla makes further strides in artificial intelligence and robotics, especially as it advances its general-purpose Optimus robots and plans for self-driving cars.
“While Tesla may still be in position to benefit indirectly from AI advancements, we believe that most of the adjacent AI efforts could be concentrated within non-Tesla entities where Elon Musk has control,” Jonas added. That would likely put more of his attention and focus on xAI, his AI startup, which just landed a home for its unbuilt supercomputer.
Jonas rates Tesla stock at a “buy” and has issued a $115 per share price target.
Bernstein
On Monday, Bernstein analyst Toni Sacconaghi wrote that shareholders are unlikely to approve the pay package.
He pointed toward the recommendations from proxy advisory firms Glass Lewis and Institutional Shareholder Services, which have advised investors to vote against Musk’s compensation. Both firms cited the “excessive” size of the package. Both Glass Lewis and ISS voted against the deal in 2018, which passed with 73% support.
If Sacconaghi is right and investors vote against Musk’s pay, shares could slip more than 5%. Bernstein rates Tesla stock at “sell” and issued a $120 per share price target.