Elon Musk, co-founder of Tesla and SpaceX and owner of X Holdings Corp, speaks at the Milken Institute Global Conference at the Beverly Hilton Hotel, on May 6, 2024 in Beverly Hills, California.
Abu Gomez | Getty Images
Tesla shares rose in pre-market trading, after Elon Musk said shareholders are set to approve a controversial $56 billion pay package and the decision to move the electric car maker's founding to Texas.
At 04:49 a.m. EDT on Thursday, Tesla shares were up 6.85% in pre-market trading.
Tesla shareholders are voting on two resolutions and can have their say at the company's annual meeting on Thursday. The first measure under consideration is whether to greenlight a $56 billion payroll package originally approved by shareholders in 2018, before a Delaware judge struck it down in January.
The second decision is whether Tesla should move its state of incorporation from Delaware to Texas. This suggestion was put forward after Musk asked his followers on the social media platform X earlier this year whether Tesla should implement such a move, and the answer was a resounding yes.
Musk has now said that both resolutions are currently being passed “by a wide margin,” without revealing details
The initial pay package had aggressive targets for Tesla's financial performance and market value, and while the company has transformed into one of the world's largest electric car makers, a lot has changed since 2018.
Tesla faces slowing growth and increasing competition, especially from Chinese players. At that time, Musk also bought Twitter, now called X, and intensified focus on other projects, including his brain-computer interface company Neuralink and artificial intelligence company xAI.
Critics of the salary deal claim that Musk is distracted by his other endeavors and that the package, the largest in US corporate history, is excessive. More recently, they say Tesla's financial performance has not been up to scratch.
Some prominent shareholders said they intended to vote against the deal, and senior proxy advisors, Institutional Shareholder Services and Glass Lewis, also recommended the move. The California State Teachers Retirement System, a massive pension fund, also objected to the package, claiming the amount was too high. Likewise, Norway's sovereign wealth fund has expressed its opposition.
Pro-compensation shareholders argue that Musk is integral to Tesla's future success and that the billionaire will take his efforts elsewhere if he is not adequately compensated. They claim the pay package incentivized Musk.
Billionaire investor and longtime Tesla shareholder Ron Barron said he was voting in favor of the pay package, suggesting Musk is key to the electric car maker's future.
“At Baron Capital, our answer is clear, loud and unequivocal: Tesla is better with Elon. Tesla is Elon,” he said this month.
Meanwhile, some major investors, such as Vanguard and BlackRock, have not said how they will cast their votes.
