DETROIT — Tesla shareholders are charting the future of the electric vehicle company on Thursday as they wrap up voting on whether or not to reinstate CEO Elon Musk’s massive pay package that was thrown out by a Delaware judge.
The company’s shares rose on Thursday after Tesla said in a regulatory filing that shareholders are voting to approve Musk’s pay, worth about $44.9 billion, by a wide margin.
In a filing with the US Securities and Exchange Commission on Thursday, Tesla released Musk’s own posts late Wednesday on X, the social media platform he owns, with charts that appeared to show shareholders were in favor of the package. his compensation, as well as a measure. to move Tesla’s legal home from Delaware to Texas.
The company sought the votes after a Delaware judge threw out the pay package in January. Chancellor Kathaleen St. Jude McCormick determined that Tesla defrauded shareholders when the all-stock compensation was approved in 2018, so Musk is not entitled to the historic package, which was worth about $56 billion before a slide in the stock this year.
Legal experts say the release of vote totals during the voting process could present problems for Tesla, which may be why the company filed with the SEC, which is likely to review the matter.
Shareholders can still cast votes online Thursday and in person Thursday afternoon at Tesla’s annual shareholder meeting in Austin, Texas. They can also change previously cast votes.
“Every time you tell people you’re winning, you’re encouraging others to join you and naysayers to back off,” said Charles Elson, a retired professor and founder of the University of Delaware’s corporate governance center.
Erik Gordon, a law and business professor at the University of Michigan, said Musk’s posts could attract legal scrutiny. “His post had better be accurate or anyone who bought stock relying on it will have a securities law case against him,” Gordon said in an email.
The SEC declined comment Thursday and a message was left seeking comment from Tesla.
Elson said posting vote totals with corporate proxies before voting is over is “highly unusual.”
Musk’s social media posts have caught the attention of the SEC before. He and Tesla were fined a total of $40 million for statements about financing to take Tesla private that Musk made on X’s predecessor, Twitter, before buying the social media platform.
Tesla shares rose a little more than 4% to $184.67 in Thursday afternoon trading. The stock is down about 25% this year.
If the pay package is approved, it would almost guarantee that Musk would stay at the company he grew to be a world leader in electric vehicles, moving into AI and robotics, including autonomous vehicles, which Musk says is the future of Tesla.
But if shareholders voted against his pay, the CEO could deliver on threats to take AI research to one of his other companies. Or he could even leave Tesla.
Even with approval, there would be uncertainty. Musk has threatened at X that he will develop AI elsewhere if he doesn’t get a 25% stake in Tesla (He owns about 13% now). Musk’s XAI recently received $6 billion in funding to develop artificial intelligence.
According to Musk, early indications suggest that shareholders also support a move to move Tesla’s legal home to Texas and out of Delaware.
The move is designed to escape Delaware court oversight and possibly the McCormick ruling. In a January opinion on a shareholder lawsuit, the judge ruled that Musk controlled Tesla’s board and was not entitled to the historic pay package.
Many institutional investors have come out against the sizable payout, some citing declining vehicle sales, price cuts and a drop in Tesla’s stock price. But Tesla’s top five institutional shareholders, Vanguard, BlackRock, State Street, Geode Capital and Capital Research, either said they do not announce their votes or would not comment. They control about 17% of the vote.
One institutional investor that came out against the package is the California State Teachers Retirement System. The big pension fund said on Tuesday it would vote against Musk’s pay “based on its large size and because the price would be extremely dilutive to shareholders. We also have concerns about the company’s lack of focus on profitability.”
In May, two advisory firms with major shareholders, ISS and Glass Lewis, recommended a vote against the package.
But Tesla and Musk have unleashed a frenzied lobbying effort to get the package approved, in X posts, television appearances and in proxy filings with the US Securities and Exchange Commission.
Tesla chairman Robyn Denholm wrote in a letter to shareholders that the package was approved with 73% of the vote six years ago. “Because the Delaware Court second-guessed your decision, Elon has not been paid for any of his work for Tesla for the past six years, which has helped generate significant growth and shareholder value.” . This strikes us – and the many shareholders we have already heard from – as fundamentally unfair and contrary to the will of the shareholders who voted for it,” she wrote.
Tesla has said the 2018 award spurred Musk to create more than $735 billion in shareholder value in the six years since its adoption.
If Tesla finalizes the vote to move the company’s legal home to Texas before the vote on Musk’s pay package, and it manages to file paperwork in Austin and get the move approved, then the effect of the Delaware court ruling could be in doubt. . Reauthorization of the salary package would then be done as a Texas corporation and could fall under the jurisdiction of the Texas courts.
Anticipating a swift move by Tesla, lawyers for the shareholder who filed the lawsuit to block Musk’s payment deal, Richard Tornetta, filed motions in Delaware last month seeking an injunction to stop Tesla from trying to move the case. Tesla responded in letters to the judge that there is no reason for such concerns because they will not seek a motion. In addition, Tesla would still be a Delaware corporation at the time of this week’s shareholder vote, they wrote.
In an order denying Tornetta’s motions, Chancellor McCormick wrote that she interprets Tesla’s letters to mean she does not intend to move the case to Texas. “The statements of the defendants give me great comfort,” she wrote.
Eric Talley, a law professor at Columbia University, said he expects Tesla to appeal McCormick’s decision to the Delaware Supreme Court.