Tesla Inc. shares saw an approximate 8 percent rise in pre-market trading on the Nasdaq Thursday, following statements from CEO Elon Musk on Wednesday night that shareholders are likely to approve two key Board resolutions, including his substantial $56 billion pay package.
Shareholders of the luxury electric vehicle manufacturer are voting on Musk's compensation plan as well as a proposal to relocate the company's incorporation to Texas. Final decisions will be made during Tesla's annual meeting on Thursday.
On his social media platform, X, Musk remarked, "Both Tesla shareholder resolutions are currently passing by wide margins! Thanks for your support!!" No further specifics were provided.
Shareholder opinion remains split over the proposed pay package, heralded as the largest in U.S. corporate history. While originally endorsed by shareholders in 2018, it faced significant backlash and was annulled by Chancellor Kathaleen McCormick in January, who criticized the approval process as biased due to Musk's substantial influence on the Board.
Proponents argue Musk is critical to Tesla's future, while critics deem the compensation excessive and potentially harmful to the company, citing Musk's preoccupation with his other ventures, particularly the social media platform X.
Tesla Board Chair Robyn Denholm recently urged shareholders to back the pay package, warning of the potential risk of losing Musk as CEO. Denholm stated, "Elon is not a typical executive, and Tesla is not a typical company. The conventional methods of compensating key executives won’t drive results for Tesla. Motivating someone like Elon requires a different approach."
Billionaire investor and Tesla shareholder Ron Baron expressed his intent to support the pay package, remarking, "Tesla is better with Elon. Tesla is Elon." Conversely, the California State Teachers' Retirement System and Norway's sovereign wealth fund opposed the package, arguing the valuation was excessively high.
Additionally, proxy advisory firms Institutional Shareholder Services and Glass Lewis have advised voting against the compensation package.
The resolution to move Tesla's incorporation from Delaware to Texas emerged after a favorable response on social media to Musk's inquiry about the potential move earlier this year. This proposal followed the Delaware court's decision on the pay package. Musk had previously stated, "Never incorporate your company in the state of Delaware. I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters."
Tesla relocated its corporate offices from Palo Alto, California, to Austin, Texas, in 2021, citing regulatory issues and disputes with health officials over the reopening of its Fremont facility during the pandemic.
These developments occur amidst challenges Tesla is facing, such as weak demand and increasing competition in markets including the U.S., Europe, and China.
Tesla shares ended Wednesday's session at $177.29, a rise of 4 percent. In pre-market activity on the Nasdaq, the shares are currently at $191.31, up 7.9 percent.
