June 13th is poised to be a pivotal day for Tesla (NASDAQ:TSLA) shareholders, with several critical decisions on the agenda. Chief among them are two major proposals: first, relocating Tesla’s headquarters from Delaware to its primary business location in Texas, and second, a pay package worth around $50 billion for CEO Elon Musk, which earlier this year was voided by a Delaware court. The payment package approval will need a majority of votes excluding those from Elon or Kimbal Musk.
Morgan Stanley analyst Adam Jonas thinks that while some investors are aware of the meeting/voting date, there is a “surprisingly little amount of attention being paid to its significance to the performance of the stock.”
In contrast, Jonas sees the vote as one that will have a big impact on the “long-term strategic direction” of the company. “While impossible to predict the outcome, we expect the event could drive material volatility in the stock,” the analyst went on to say.
As of February 2024, Musk’s ownership of Tesla stood at around 20.5% when factoring in the options granted in the 2018 award. Excluding these options, Musk’s direct ownership of Tesla amounts to roughly 13%. Musk is not happy with any of that and is seeking to have around a 25% share of the vote.
Within his portfolio of companies (the “Muskonomy”), Tesla stands out as the only entity where Musk lacks control or a “blocking minority vote.” Although all of Musk’s ventures are connected to AI in some manner, he has expressed concerns about deepening Tesla’s involvement in AI without holding approximately 25% of the voting power. This concern apparently stems from Musk’s desire to maintain control in the event that this “powerful technology goes awry.”
While approving Musk’s 2018 compensation package wouldn’t directly give him a 25% voting block on its own, Jonas still considers the result to be important with approval amounting to a “vote of strategic support.”
So, what are the consequences should the payment package be rejected? “The options will likely be unwound,” explains the analyst, “making it increasingly difficult for Musk to achieve 25% ownership.”
For Jonas, Tesla’s AI prospects will be limited until there is some resolution to the voting control matter, with the analyst believing that as long as the issue of blocking minority “remains in limbo,” Tesla’s share price trajectory will continue to be “dominated by the more sobering developments within the global EV industry.”
All told, Jonas rates Tesla shares as an Overweight (i.e., Buy), while keeping his $310 price target intact. If his target is achieved, investors could realize a potential return of ~80% over the next year (To watch Jonas’ track record, click here)
Jonas’ take is one of the Street’s more optimistic ones. In general, most analysts have a more cautious stance; based on a mix of 15 Holds, 9 Sells and 8 Buys, the analyst consensus rates the stock a Hold. At $173.29, the average target implies the shares are more or less fully valued. (See Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
