Tesla (NASDAQ: TSLA) stock rose during pre-market trading Friday after shareholders approved Elon Musk’s $56 billion compensation package.
Elon Musk secured a significant victory on Thursday as Tesla shareholders voted in favor of Elon Musk’s controversial $56 billion compensation package and approved relocating the company’s incorporation to Texas during its annual shareholder meeting on Thursday.
A Delaware judge struck down the compensation plan, originally approved by investors in 2018, earlier this year. However, at Tesla’s annual shareholder meeting, shareholders approved the proposal as a resolution, potentially strengthening the board’s position against the court order.
Despite opposition from notable shareholders like Norway’s $1.7 trillion sovereign wealth fund and the California Public Employees’ Retirement System, some influential voices, including Baron Capital, which holds 17.22 million Tesla shares, backed the pay package. Founder Ron Baron emphasized in an open letter that “Tesla is better with Elon. Tesla is Elon.”
Even famed short seller and long-time Tesla critic Jim Chanos supported the package, remarking, “A deal’s a deal even if it’s a bad deal.”
Analysts had expressed concerns that the compensation proposal rejection could negatively impact Tesla’s business and stock price. Musk had hinted at potentially continuing his artificial intelligence initiatives elsewhere if the compensation was denied, and some speculated he might even leave the company.
Delaware Court Ruling Remains Valid
Although shareholders have approved the compensation plan, legal experts remain uncertain whether this will be sufficient to overturn the Delaware court’s decision. Tesla (NASDAQ: TSLA) hopes that the shareholder backing will help resolve the issue, particularly after the court’s criticism of the company’s failure to disclose important details to shareholders.
In a regulatory filing in April, Tesla expressed its intent to use shareholder approval as leverage in the ongoing legal battle. Lawyers for Tesla will meet with the court in July.
Texas Incorporation Approved
Additionally, Tesla shareholders approved the company’s plan to move its incorporation to Texas from Delaware. This follows the company’s relocation of its corporate headquarters to Austin, Texas, from California in 2021, a move driven by Musk’s dissatisfaction with California’s regulatory and tax environment. Musk has also voiced criticism of Delaware’s court system, advising companies to incorporate in other states.
In addition to the compensation and incorporation decisions, shareholders approved the re-election of Kimbal Musk, Elon Musk’s brother, and James Murdoch, son of media mogul Rupert Murdoch, to Tesla’s board.
Tesla (NASDAQ: TSLA) Stock Price Action
As of 05:49 a.m. (Eastern Time) Friday, TSLA stock traded at $184.61, marking a 1.17% increase compared to the previous trading session.
