This week, Tesla’s investors will decide whether Elon Musk gets his whopping $56 billion pay package. But a top analyst, Toni Sacconaghi from Bernstein, thinks it won’t pass.
The vote’s results will come out during Tesla’s annual shareholder meeting on Thursday. If shareholders say “no” to Musk’s package, Sacconaghi predicts Tesla’s stock could drop by about 5%.
Sacconaghi says it’s tough for Musk to get approval. Tesla’s highest voter turnout so far has been 63%. Even if 75% of shareholders vote, it’s still hard for Musk to win.
Why? Well, proxy advisers, who give advice to investors, say “no” to the package. Also, about 20% of Tesla’s investors are passive, meaning they just follow advice.
Chris Ailman, from CalSTRS, which owns 4.6 million Tesla shares, is also voting “no.” He thinks Musk’s pay is too much for a car company CEO. Ailman jokingly says Musk should fly to Mars if he wants more money.
If Musk doesn’t get his pay, Tesla’s stock might drop even more. Sacconaghi worries that Musk might focus less on Tesla and more on his other projects.
He says, “If it’s not approved, there certainly could be a further appeals process, but I expect the stock to potentially react negatively.” Sacconaghi thinks Musk might worry less about developing AI at Tesla if he doesn’t get his way.
Even though a “no” vote might hurt Tesla’s stock in the short term, it could help Tesla make more money per share.
Sacconaghi thinks if Musk’s pay isn’t approved, Tesla’s earnings per share could go up by about 10%. Sacconaghi thinks Tesla’s stock is overvalued and predicts it could drop by 32% from its current price.
However, not everyone agrees. Dan Ives from Wedbush Securities thinks most shareholders will say “yes” to Musk’s pay package.
